Unlock eSignature Legitimacy for Small Businesses in Australia

How to eSign a document: eSignature legitimacy for small businesses in Australia

hello everyone and welcome to this special webinar I'm rerecord e1 though I did a little while ago and it's on my 12th grade tax deduction for small businesses so it's been updated a little bit and added a few more things to it very popular last time but I thought I just make it a little bit better now if people who don't know me my name is Derrick Nolan I'm the owner of twelve child accountants I've been doing these webinars for a long time now many years so if you haven't seen any of them in the past make sure you look at my website 12.com do you go into webinars and you'll see a whole heap of ones to dabble they're mainly focusing on small business a lot of tax folks of course because that's what I mainly do but um a few other good things there as well okay so I'm going to wear today is my favorite or my best tips for um some businesses and their tax deductions now what I'm going to try to do today is just not do the the normal ones the ones I going to do today a little bit different um so you may have to watch this a couple of times because I do sort of go through a few things that most people wouldn't have thought about and you may have to you know have another how about watch it at the end of it okay go and jump into the first ones nice and easy though it's all about Home Office now everyone sort of gets the Home Office particularly a small business owner and you probably got a place at work somewhere else for me it's hearing someone in the office and I do do some work at home so I'll talk about that in a minute but the first thing is the tax office obviously are cracking down on home often have been for a while now so it's something to be really careful now the number one thing that tax office talk about with Home Office is that it must produce income so there's no problem with calling your home you know it needs to be called a place of business and a place of business the one of the key characteristics there is that you're actually producing income now in my case here I'm an accountant so I was to work at home and have there's a place of business I probably would need to be seeing customers there people would probably need to come to my office and I'd you know do my work there now now I probably could argue if I really wanted to that it is a place of work because I actually am generating chargeable time at home but the tax office were equally young consider well the reason I do that take work home in the evenings and do it is completely out of convenience I've got a personally good office here why don't I just stay here and do the work here in fact I'm taking it home is just for my own benefit a good argument as well so for people they're just you know like myself is probably not much of an argument and what they do say just doing bookkeeping on the dining room table that doesn't classify as a place of business you really need to produce an income and that that's pretty much one guy ok I'll be sticking to for the whole up than the whole over now we'll go through a few other things later on about how you can actually make that a place of business let's say you have so you have determined that your home is a place of business there you go multiple places of business could be the only place you have you might be a person that works out in the back of the Ute and you don't have an office so therefore your home office becomes a place of business now you still need to determine you actually doing or producing income so as a tradesman or something like that you need to sort of show that you have a work bench at home that you actually do work to take onto the site the next day the factories doing your paperwork at home stop going to unconstitu your home office not for small business tax deduction purposes so I mean is it once you have to determine you do have a Home Office's things like obviously office furniture a portion of your rent if you're not owning your own home if you do own your own home is that depreciation on the building your actual home there's obviously interest on the home loan and there's the normal things like council and water rates and things like that not only the expenses though if you've got expenses like telephone and Internet which is really predominantly work-related you claim those separately what I'm talking about here with the floor space and things like that I'll go through it and see these all the things that sort of can't be identified as purely work or purely non work you know rent for example if you pay rent for the whole house you're not giving your businesses are charging giving part of the rental and you giving the other part to your landlord so it's one of those things that's up to you to determine and basically it comes down to floor space if you get a map of your home and you say well this that that spare bedroom there and maybe the garage and you know part of machine or something like that has been used as the business well you just work out what all space a zabis each of the total size at home and claim that it's pretty simple if you're self-employed that's what we talked about it comes down a procedure costs that part of the business so for example the company rents offers from you so sorry with the home office if you're self-employed is pretty straightforward because you've got you own the home or you're renting the home it's in your name the business is also in your name so therefore the deduction is quite straightforward this is a certain percentage of those costs however it gets a little bit tricky though if you own a company and you run your business through a company or a trust because effectively your home isn't owned by your company well for years it better not be no am i watching now so what actually happens here is company rents the office from you it's like you're a got an investment property and there's a portion of it that you're renting as an office now it could be to your business it couldn't get any other business but you then get wrecked that comes in which becomes income to you now if you and your spouse are in the house or that rent becomes you and your spouse's 50/50 and obviously if you've got deductions that you can claim against that obviously all those things we just talked about which is your your rent or a portion of your rent interest deductions and depreciation all those sorts of things you actually claim it in your own personal tax return so it's a little bit of a difference of actually how you do it but the end result is still the same now all these things what I've done is I've done the long version of it I actually did a webinar on this it's actually called all your home off as tax deductions explain so again go to my website twelve condo you go into webinars and under recorded webinars there's this one here so so I think that's enough and I got to go through all the details because I go through a lot of detail in the webinar okay so go and check that one out number two is one of my favorite ones is hire your children now a simple thing there is there is in New South Wales and all the other states as an industrial relations act called the children's employment act now that covers all the things you need to worry about when you hire a Jew when you're hiring children under the age of 18 covers are everything from pay rates and when you can claim when you can you know they supposed to have a rest and all that sort of stuff now the exciting thing is that if you're employing your own children in your own business then the children employment act doesn't actually refer to you at you're a completely exempt from which is great because you don't have all these rules to follow you can basically pay your children what you want work then when you want and it really makes it much easier - hi you children now having said all that and then techsan has got some rules as well and we'll go through all those things in a sec but what you've got to do the high your children properly these do everything that you'd normally do with a an employee like treat them properly make sure you actually do pay slips for them you actually if you've gone in might be and you have other employees put them on MOV and do everything else the same as if you're doing the other employees now great deal s there's no superannuation if they're under the age of 18 and they're not working 30 hours a week so I don't need to worry about that but basically what I'm saying is just treat them as if they're real employees now a great thing is I've just done last month's women I was on how to hire your children in your business the right way so it's a really good webinar runs for like 45 minutes or something like that go through all the different ways and how you need to basically treat your children as if they're proper employees so go and check that one out again at 12.com do you live in US and that's a really good one that one okay my third one is now this is another really favorite one it used to be the twenty thousand dollar asset right on now it's thirty thousand dollars because the the tax office have got a little bit more generous now what this is is for any equipment that you want through your business now the tax lots aren't being quite as generous what you first think when you normally buy a piece of equipment this could be for a motor car as well and it's powered your business and owned by a business being used by your business with your sole trader or a company now most people understand what depreciation is so it's basically taking the cost of an asset and writing it up over time so if you have a twenty thousand dollar asset and you're right off over five years leaving your four thousand dollar deduction of $4,000 or four thousand dollars of $4,000 fourth so for five years and eventually $20,000 as a tax deduction and just five years to do it that's all so what the tax offs are doing though is that the same will actually from now on instead of having to depreciate it you can ride off in though year you buy it which is great news because then you don't have to worry about depreciation jingles and and all that sort of stuff so you can actually get a deduction straight up the other important thing there is not just limited to one item now I've got a client that set up a gymnasium recently and even they spent close to $250,000 on all the equipment in the gym there wasn't really any items that went over $30,000 so there might be the rowing machines and some weights but all that individually they added up to quite a substantial amount of money but individually though they were less than $30,000 they got to worth only a match they want so they have a tax problem this year and probably for a few more years to come a lot of people think that's only $30,000 and once you've got to that you can't do any more but that's not the case now what I really like about this deduction is particularly around this time of year so here we are we're probably about the 15th of June today two thousand ninety so Simon bought something today for $20,000 under the old method what you would have to do you should write it off over five years in this case it actually stretches them over six tax years a little bit in this year so in the first year so if you bought something that's not quite right there that way years run but in the first year you only get one hundred and sixty four dollars as a tax deduction do you know you go and spend $20,000 today I mean four thousand next year four thousand a year after four thousand then four thousand then going forward so you going to spend $20,000 right now you only get a hundred and sixty four dollar as a tech stuff there's only like 15 days of the year now under the new method though in the first year get $20,000 as a tax deduction how good is that much much better so it's really good but this time of year when you're thinking about Jesus I've actually got a bit of a text problem here what can I do about where in the old days young spend some money it didn't really help but the new taxation rules are really good now again I've done a webinar on it so make sure you go and look at my my website because there it is another webinar on the $30,000 s it right off so go and have a look at that all the things you can claim it I actually do it ok number for holidays now this is this is what we talked about this is as you're running your own business these are the sort of deductions that you're you want to be out of claim because that's why you you do your business for yourself now the key to this though plan in advance ok that's all I'm gonna say about planning your holidays don't just arrive a in Hawaii or somewhere like that and try and justify as a business deduction ok so make sure you plan at first think about well where I want to go now if you go to Hawaii as an accountant there's always a conference or something like that that you can go to but again don't just turn up there and look around for an accounting conference do your research make sure there's something on there and then if there is something on buy your tickets in advance before you buy your airline tickets just stuff like that really simple now it also needs to relate to your current income not what any new business venture or any new business you're going to be looking in the future say like the are do I really want to I really want to be an importer of toilets I don't know somebody go in toilet convention somewhere doesn't work that way unless you're in the business of doing that in the first place don't go to tax deduction for it so again just making sure you know the rules there's other certain rules which that sort of literacy what introduction is things like it needs to be four hours a day so if you go to a conference is make sure the four hours conference now it doesn't need to be a conference as well you might be going to Europe and you're got some contacts over there you need to follow up now again I'll make sure that you've email them well in advance don't the know you're coming and things like that you don't need to turn with that if you want it but but at least it makes thank you have been a little bit but when you get me you need to Dyer eyes what you did for at least four hours a day to make that particular day deductible now I'll get through the examples why that's important but what the tax office I've allowed you just do is if if you say well that day isn't work day we get to claim your breakfast lunch and dinner and all the expenses your conference expenses obviously and your accommodation for that date if you don't get to the four hours none of accounts okay so it's really important that you do that now the important thing is the airfares that's where your big cost is so for example if I decide to go to Hawaii for a conference did all planning things like that and I decide to go just for the one-day now the tax office say you can get deduction for the airfare is there and back because that's what the dominant purpose of the and the only reason I was going but of course when I get there yeah well I'm not going to go all the way to the wine just to come back here in the next day I might stay the ten days and do a bit of surfing so what the tax office will allow you to do is to claim the airfares there and back and they'll allow you to claim one day of meals and accommodation because that's the one day of the conference the other nine I can't but that's okay the air fares are sort of the majority of the cost so as long as you sort of understand that that the dominant purpose was you went there in the first place attend the conference the fact that you stayed on he's irrelevant and can't be the other way around you can't say I went surfing first and by the way I was over there I decided to go to a conference yeah there's an example down the bottom there where you got ten days he's spending $400 a day so I've actually cost you four thousand dollars but if you can work out there's four of those days was business well obviously it's a it's a pro rata number five it just so happens that my webinar next month is on this get the right business structure so I actually haven't got that there but what promo time you get to to watch this one there will be so make sure you go and check out my website for the one on the right business structure now what we're talking about here is Iran gets yeah you can have different structures and has different tax effects now obviously there's different ones like sole trader company and family trusts they're the common ones now in a nutshell what I say to people is that sole traders are fine because everyone's going to sort of start off as a sole trader but really if you're got yourself a reasonable-sized business or a fairly serious business you need to regress and the natural progression from a sole trader into either a company or a family trust the bottom line is companies pretty much are purely used for asset protection purposes because they have limited liability so they have boy if you get sued they're suing your company and all the assets of your company not your personal wealth that's why you have companies where a trust a family trust is a common type of trust that is used to reduce your tax so if you've got a tax problem the Family Trust is the way to go usually now you've got to get this right and every situation is different however that normally what I'm normally fine so you really need some advice on this on stuff however the good news is guess what I've done a webinar on it now I'm going to be doing one like I talked about on all the different structures but the family trusts what I've already done is probably one most popular ones are there I think it's got over 17,000 views on it already go and watch this one all about the family trust and how can actually really help you minimize your tax if you're running a business ok number 6 car deductions now this is probably the number one question I get from clients through the year is about owning a car and they run their own business should only my own name should the company own it how should I fine answer all those sorts of questions what I say is that if you have if you're a a business person and you can have an FPT exempt motor car you get the company to own it ok now one FBT exempt motor vehicle is is basically a 1 as a commercial vehicle a man a ute anything that's basically designed to carry your load as long as you need to carry a load like an accountant wouldn't need to carry a load so this there's no any no type of car I could ever purchase that would be except for me if you're in the business of medium vehicle that's carry a load well there's plenty of FPT exempt vehicles for you so basically if it's exempt fantastic buying the company run all the deductions from the company it's all 100% deductible and there's no sort of steam the towel for an it beauty bill however all other cars are private cars so what I always say that it's really difficult to run it through a company now because of the rules the FBT rules changed in 2012 and make it really really difficult to be able to make a tax effective now even people that work at Elster and Qantas and they can't do it anymore the only way to do it is through the long work method I'm the FPT rules and I have come up with 58% is my magic number now 58% means that you need to be over that as a percentage of business use so if you have a car now it was f been to exempt no plum at all to Quinn the company move on but if you're really using a car for private now could be that your spouse's car whatever you need to show 58% work related to make it worth your while with all the FBT rules capital gains tax rules GST rules and things like that that's what you've got to do so just just make sure you don't get me sent car now guess what I've actually done another webinar on this on how to make your car a tax deduction so again go to ww-well calm day you on the webinars and look for the car as a tax deduction goes through a modern detail there and you'll really find that one he's a really good one because I'm dressed all the questions you've probably already asking yourself before you actually ask me okay number seven ripping through them now is pay yourself super now this one I still can't believe how many people disregard this one because this is one of the easy ones pay yourself super it's all about pay yourself super now you get a tax deduction for it that's a good thing so it's different to paying money for other things and getting a tax deduction because that normally involves paying made as someone else and your tax deduction for it now you don't to be too clever to work that one out well I always say just pay your accountant more gives you being a tax deduction we super though you actually just paying it to yourself now might you might not be in your in your wallet and just it's in another account which is your superannuation account but still to yourself so hasn't actually gone anywhere but the tax office still give you a tax deduction for how goods that the other thing too is self-employed people are really really bad paying money into this super fund they really are because the last thing that's thought about and normally around June when you've got no money so it's one of those things I really really courage this one the other thing too is that people always think I can't touch my sweeper in time 65 well that's not the case either you can actually access your super when you're 55 now I'm 52 so it's not that far away so it's not one of those things where you think you Wow like mind is super I'll never see it again it's not like that at all so there's a few other rules you need to follow again you put up to 25,000 dollars a year into super and get a tax deduction for it pretty good so there's been an example here I want to go through now if you go make a ten thousand dollar contribution to super and depending on tax bracket you're in but if you're under $180,000 you still in the 39 percent personal tax deduction so whether you're a sole trader or you have a company that run your business through it's still the same even though companies paid 27 a half percent tax you still gonna get it out of your company so when you do that you're probably paying thirty nine percent tax for it anyhow so by getting out by the way of making contribution or super you still are paying thirty nine percent tax on that money when you take it out so by getting a tax deduction it's still the same rate so in this situation if you paid $10,000 worth of contributions into super you can actually reduce your tax by merely four thousand dollars so it's really an cost you like six thousand dollars and hasn't actually gone anywhere it's just into an account you can't touch her a few more years so it's something that really really encouraged people to do and in a way the twenty five thousand dollar cap is a bit of a pain because I would love to be out put more money into super than the twenty five thousand dollars okay so have a think about that one so number eight converting bad debt into good debt now what I mean by that is that well what good debt now no decks good by the way but the terminology good debt means it's tax-deductible debt and those things are normally like investment property loan or something like that anyone so it gets that we're bad dick is non-tax deductible loans like normal your home loan so I'm just sort of wonder fraying that while people do know what the differing a good debt and bad daddy's now a lot of people have bad debt which is your home loan now like I said having debts not great but it's better to have good depth and bad debt now a lot of people have a bucketload of bad debt and no good debt so how do you turn you bad debt into good debt and I'll show you how a couple ways so the first way now imagine you've got a company and when you first started the company guess what the banks won't lend you any money they just won't like they'll just laugh at you the first question is how long has your company been around for and you say well it's about yeah a couple of days and they going back whenever I lend you anything come back in two years as a minimum so as a result well if you want to start up a company where's the money going to come from from you of course so you are the goodness of your heart lend your company some money to get going now depending on what your plans we've cut me out it could be a little bit it could be a want sometimes it start off is a little bit and it becomes a little bit more and a little bit more and a little bit more and end up being a lot anyways that's another problem but the question is will where do you get the money from to lend to the company now if you're been doing the right thing and paying down your home loan well you'd probably go a little bit redraw or offset or something like that same go and get it from there take it out of your home loan and put it into your company so effective your reborrowing or increasing your home loan or your bad debt so you'll end up paying more bad debt which is not taste adaptable even though you've increased your home loan to put into your company and still consider just part of your home loan therefore bad debt so what we do about now in 2002 the federal courts determined it's okay for a company to borrow money to repay debt now the tax office didn't like that you were borrowing money just to pay a debt they didn't believe that was tax-deductible the only thing that gave you a tax deduction was actually the but the the the expense in the first place not the repaying of that expense and yeah change it in 2002 that made it much easier to do the conversion so this is what you do so you got the company now what happens is after a few years the company can actually go on borrow money and own name now hopefully you've got to come in as bit profitable it's got a good track record and it's been around for a few years so you actually go on borrow the back now you may still unfortunately have to offer the bank personal guarantees so you're not going to get out of the asset protection problems but that's okay the bank will still with your guarantees allow the company to have the borrowings so then the company just goes and borrows money from the bank so say for example you put $100,000 in your company it's still over a hundred thousand dollars so the company that goes and borrows a hundred thousand dollars from the back now it's obviously increasing your debt which is not a good thing but then what happens is the borrowings for the company becomes good debt because you've borrowed it to guess what we pay alone and as we said 2002 they change the rules so we pay alone repaying the debt the interest that the company is now borrowed is tax deductible on that loan and obviously that money goes into the company now he needs to do this properly as well get some advice on this needs to go into the company and then it goes to you so therefore the loan is then repaid and then you of course don't go buy a yacht or anything like that go and put on your home loan so in total your debts has stayed exactly the same but now you've got some of it in the form of good debt and it's reduced you'll bandit okay so it's a little bit of churning that to be done but that's how you do it and then of course the company claims the deductions of interest and and off you go that's how you convert now number nine is very similar but what it is it's actually claiming interest on your current home loan so the way you do this though is you need to have a formal document it's almost like you are the bank of Derek but you what you've already done is already linked the money to the company so what you need to do now is to go and formalize that loan and I'll explain to what you need to do on the other side so you can you receives a tax deduction to the interest page will we understand that and it's also important to have a split loan I'll explain why those two things are really important in a second the other thing is the tax others don't like you mixing your debt so if you have a home loan and you go and increase a $500,000 and you increase to $600,000 but that hundred thousand dollars you used to buy an investment shares or go or something like that the tax offers don't like you mixing your deductible and non-deductible debt they just don't like it pretty much they call it a split loan and they don't allow the deduction for the inductor will be so what you need to do is you need to go and borrow by from the bank to repay so say you actually borrowed got away with the bank and you've used that money and meant it to your company over time what you need to do is you need to go back to your bank now so say everybody has a loan account where they come in say it's a hundred thousand dollars but you have a link to your company over these and your home loan is $500,000 what you need to do is to go back to your bank now and say I would like to split my home loan into two parts and they need to be separate loans okay a $400,000 and one on $100,000 what you actually doing them saying well I'm gonna split this line - too long they have $100,000 is the same money that I lent my company so therefore you personally are going to get a claim and tax deduction on the interest on that portion the loan and the other $400,000 you say will that $400,000 where i used to buy my house which is non-deduction all day but you need to do that split otherwise it doesn't work the tax office won't let you claim the deduction for it now what happens they needs of course you just go and continue to claim the interest on it now the company can pay you money for that borrowing money it all depends on the agreement was in the first place but you'll need to talk to your accountant on that and that's a little bit tricky moving on number 10 selling your business well this is really really important I was actually talking to someone today who are selling their business and and within an hour of talking to the the person who was selling and photos by we basically say $400,000 I'm just a few key things we set up along the way and the important thing here is you need to plan well ahead I always say that every business at some point it will be sold well not every business some sudden get to register all wound up now that could be when you pass away it basically gets sold to your family but at some point you need to sort of plan to have your business that ultimately will be sold one day now the important thing to worry about here is that there's a lot of small business concessions particularly with the selling of a business because the tax office understand that a lot of people that own their own business this is their superannuation this is their retirement strategy so they've given some really good concessions for when people sell their business not only for their business that they're selling but the assets that go with that business so you might have a business you might sell for a few hundred thousand dollars but it owns a block of land or or a shed or a-- or a factory worth ten million dollars that's an integral part of that business if you sell all those together the entire amount could become subject to no capital gains tax if you get it right made out of ten million dollars but but a fairly large cause right now what's really important here is to qualify for the small business concessions is that cry to the first July of 2016 you turn over had to be less than two million dollars because part of the small business a concession with one's G is Tier one knows about that the great thing is when footage like 2016 they increased it to turn o of less than ten million dollars so that's a lot of my clients now fall into that category so you might think yourself as a small business but you are now you are a small business and as a result you're now subject or can take advantage all the small business concessions and one of them the big ones is this massive capital gains tax discounts for small businesses but you need to plan ahead and make sure you're in the right business structure and all those sorts of things so I'll probably do a webinar on that one later on so there's a really good one couple of simple ones of entering defer claiming your income this is pretty straightforward people on a cash method can think about well in June maybe not banking that money leave it till July pretty straightforward and people who are on the cash method but on that a and accruals method they here's probably just think about changing the date on their invoice from June to July pretty simple because if you can make the problem next to yous problem you save yourself from tax however never it's never that easy of course because you might do that and then for some reason you want really good fun he chose to go and borrow some money from the bank from all those other ones but yeah it's still a good tax deduction okay and my last one a lot of people forget about this one as well is that try and use companies that have already got tax losses you may have already had a business man I've gone to well don't throw the company away you can use those losses I get too many people coming to me and say Derrick I want to get rid of this company I just hate it now what this sort of saying is I just hate paying the two hundred fifty three dollars a year and filing fees that's all it's saying and I say no I'm not getting rid of that company's got X amount of losses in it that will be a good thing so what you need to understand companies can carried forward losses now forever forever you could they'll actually out leave you that come you can outlive you you can die and the company still lives with losses in it it's a few rules though but if you do reg that company they're gone while they're coming up they're gone God people I still get pill coming in don't understand that losses are still useful things now the most important thing is that you need to understand you need to be the same owner though if that was wasn't the case I'd be buying all these companies off people and I wouldn't have a tax problem in ever but can only be your so if you're the shareholder of a company that encourage losses well unfortunately you're the only person they can use those losses unless you have someone clever who can men knows and what about the distribution from family trust and they go back to one of my other earlier points now if you've got a niece or a nephew or a cousin or someone like that who has a business and make up profits you all got a company that's got losses in it this is in a lot of cases those profits can come over because you're an associated entity and news of your losses so don't go and throw your losses away and make sure if you've got you might not be in business anymore let people know in your family that that you've got some losses and they might go and use them okay so they might 12 favorite and slightly different tax deduction for small businesses I hope you got something out of it hopefully um you got lots of questions to ask me if you have get in contact with me just let me know what you thought of the video but a lot of people have questions so I don't mind talking to people that's what I'm here for send me an info at 12.com de you email address or give me a call and let me know what you thought about this webinar and again like I said I seem to have a webinar on most people's questions and most of these topics they go and check it out at my website and hope that you can find something that's really good all right well that's it for today and thank you very much and goodbye for now