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Thread: David's bookkeeping corner.

  1. #121
    Senior Member glassngrass's Avatar
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    Default Tax breaks for older workers

    David Uren, Economics correspondent
    From: The Australian January 22, 2010 12:00AM

    AUSTRALIANS face tax hikes as a result of the Henry tax review, but older workers could be offered lower marginal tax rates to stay in their jobs as the nation grapples with the demographic time bomb of an ageing population.

    Ken Henry, chairman of the tax review, yesterday put higher taxes firmly on the agenda when he delivered a blunt warning that future governments would need to produce strongly growing revenues in the longer term, and that taxes would have to rise as a share of GDP.

    "The tax system needs to be prepared for the probability that in order to finance the government-provided goods and services demanded by the community, revenue needs will grow strongly in the longer term," Dr Henry told a tax conference in Sydney yesterday.

    "It would be prudent to plan on the basis that the tax system will over time have to generate revenues to meet substantially larger fiscal costs." But older workers may do well from the Henry review as the government searches for ways to keep people in jobs longer to ease the pressure on the social security system.

    Dr Henry suggested cutting taxes would make a bigger difference to the number of older workers deciding to remain in the workforce than it would for people of prime working age, who were likely to stay employed in any case.

    "Older people are less likely to be in the workforce, due to retirement or working less hours," he said. "Marginal tax rates might need to be adjusted over time to ensure they reflect the changing abilities and propensities to work of different cohorts at different times in their lives."

    Marginal tax rates could be lowered for older workers by making it easier for them to work while receiving the age pension, or by extending measures such as the mature-age tax offset offered to people aged 55 and over.

    The Rudd government, which is considering its response to the Henry tax review, is bracing for a hostile political reception to the review, with Opposition Leader Tony Abbott declaring that all he expected from the exercise was "red tape and new taxes".

    The government has pledged to keep tax to no more than the 24.7 per cent of GDP averaged in 2007-08 as part of its medium-term budget strategy, and would have difficulty managing any recommendations for new and increased taxes.

    While saying he did not want to enter the debate about climate change, where the Coalition has tagged the government's emissions trading scheme as a "great big new tax on everything", Dr Henry said there was a strong case for new taxes to tackle environmental challenges.

    Dr Henry said the political challenge of tax reform was shown by the hostility to taxing fringe benefits in the 1980s, when the Coalition fought the 1987 election campaigning for its repeal.

    "Who on earth would consider it sensible that an executive who receives from his employer some part of his remuneration in the form of a Porsche motor vehicle and a holiday apartment on the Gold Coast should not be required to pay tax on that income?" Dr Henry asked.

    "Tax reform is always difficult - even the things that are most obvious. That's probably because it almost always confronts sectional interest."

    The Henry review is likely to endorse the government's long-term goal of lowering the top marginal tax rate.

    Dr Henry said highly skilled people increasingly operated in a global labour market, suggesting that their tax rates needed to be globally competitive.

    He said the ageing of the population would be a particular challenge for state governments because of their fast-rising budgets for health services.

    States have mainly depended on stamp duties, land and payroll taxes to raise revenue, but the spread of exemptions has meant fewer taxpayers are now carrying a greater burden. "Funding projected increases in state health expenditures from these taxes would have increasingly high social costs," Dr Henry said.

    There has been speculation the review will suggest extending payroll tax to small businesses and possibly exchanging the current stamp duty on property sales to a standard annual land tax, in addition to council rates, on all property.

    There has also been speculation that capital gains tax will be changed so that it is charged at a person's full marginal tax rate.

    However, Dr Henry said yesterday there was "almost no logical reason for taxing capital income at the same rate as labour".

    He said while this was a revolutionary idea, compared with Australia's current tax system, it was established wisdom in academic circles.

    The Treasury secretary said no country provided a blueprint for taxing capital income, including company profits.

    "Like the Australian environment itself, the solutions are likely to be uniquely Australian," Dr Henry said.

    The review's expected cut in company tax - financed in part by a new resource rent tax - is considered likely to bring the most fierce opposition from sectional interests.

    Mr Swan's office last night said the Treasurer did not want to pre-empt the release of the Henry tax review.

    ---------------------

    I think we'll have to wait for the dust to settle a bit first, to get our heads around it.

    There's still much to debate in parliament...

    On the surface - employer's superannuation contributions are on the way up.
    David
    Mr Sparkle Car Spa

  2. #122
    Senior Member glassngrass's Avatar
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    Default Five minute management course

    Lesson 1:

    A man is getting into the shower just as his wife is finishing up her shower, when the doorbell rings.

    The wife quickly wraps herself in a towel and runs downstairs.

    When she opens the door, there stands Bob, the next-door neighbour.

    Before she says a word, Bob says, 'I'll give you $800 to drop that towel.'

    After thinking for a moment, the woman drops her towel and stands naked in front of Bob, after a few seconds, Bob hands her $800 and leaves.

    The woman wraps back up in the towel and goes back upstairs.

    When she gets to the bathroom, her husband asks, 'Who was that?'

    'It was Bob, the next door neighbour' she replies.

    'Great,' the husband says, 'did he say anything about the $800 he owes me?'

    Moral of the story:

    If you share critical information pertaining to credit and risk with your shareholders in time, you may be in a position to prevent avoidable exposure.
    David
    Mr Sparkle Car Spa

  3. #123
    Senior Member glassngrass's Avatar
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    Default Office politics 101, (or... how to climb the corporate ladder)

    A sales rep, an administration clerk, and the manager are walking to lunch when they find an antique oil lamp.

    They rub it and a Genie comes out.
    The Genie says, 'I'll give each of you just one wish.'
    'Me first! Me first!' says the admin clerk. 'I want to be in the Bahamas , driving a speedboat, without a care in the world.'
    Puff! She's gone.

    'Me next! Me next!' says the sales rep. 'I want to be in Hawaii , relaxing on the beach with my personal masseuse, an endless supply of Pina Coladas and the love of my life.'

    Puff! He's gone.

    'OK, you're up,' the Genie says to the manager.
    The manager says, 'I want those two back in the office after lunch.'

    Lesson:
    Always let your boss have the first say.
    David
    Mr Sparkle Car Spa

  4. #124
    Senior Member glassngrass's Avatar
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    Default Corporate survival 101

    An eagle was sitting on a tree resting, doing nothing.

    A small rabbit saw the eagle and asked him, 'Can I also sit like you and do nothing?'
    The eagle answered: 'Sure, why not.'

    So, the rabbit sat on the ground below the eagle and rested. All of a sudden, a fox appeared, jumped on the rabbit and ate it.

    Lesson:
    To be sitting and doing nothing, you must be sitting very, very high up.
    David
    Mr Sparkle Car Spa

  5. #125
    Senior Member glassngrass's Avatar
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    Default Climbing the corporate ladder 102

    A turkey was chatting with a bull.

    'I would love to be able to get to the top of that tree' sighed the turkey, 'but I haven't got the energy.'
    'Well, why don't you nibble on some of my droppings?' replied the bull. They're packed with nutrients.'

    The turkey pecked at a lump of dung, and found it actually gave him enough strength to reach the lowest branch of the tree.

    The next day, after eating some more dung, he reached the second branch.

    Finally after a fourth night, the turkey was proudly perched at the top of the tree.

    He was promptly spotted by a farmer, who shot him out of the tree.

    Lesson:
    Bull **** might get you to the top, but it won't keep you there..
    David
    Mr Sparkle Car Spa

  6. #126
    Senior Member glassngrass's Avatar
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    Default Keeping out of trouble...

    A little bird was flying south for the winter. It was so cold the bird froze and fell to the ground into a large field.

    While he was lying there, a cow came by and dropped some dung on him.

    As the frozen bird lay there in the pile of cow dung, he began to realize how warm he was.

    The dung was actually thawing him out!

    He lay there all warm and happy, and soon began to sing for joy.
    A passing cat heard the bird singing and came to investigate.

    Following the sound, the cat discovered the bird under the pile of cow dung, and promptly dug him out and ate him.

    Morals of the story:
    (1) Not everyone who ***** on you is your enemy.

    (2) Not everyone who gets you out of the **** is your
    friend.

    (3) And when you're in deep ****, it's best to keep
    your mouth shut!
    David
    Mr Sparkle Car Spa

  7. #127
    Senior Member DavidS's Avatar
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    Default Re: David's bookkeeping corner.

    Hi David.

    Just discovered this business software, my accountant recommended it to me. I have now played with it for a week and I have now deleted. MYOB and Quickbooks, they both suck as far as I am concerned, to complex. This Cashflow is so much easier to use for me as a small business with no book keeper or accounting experience.
    What are your thoughts on this.

    Cheers DavidS

  8. #128
    Senior Member glassngrass's Avatar
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    Default Drill bits and accounting software

    Was surprised by a lesson from a marketing expert recently.

    Last year in Australia there were 287,113 10 millimetre drill bits sold!
    Big deal?
    Well think about this...
    Not ONE of the 287,113 people who purchased a 10 millimetre drill bit actually wanted one!

    What?
    What was it that they all wanted then?

    Well think about it ... what they all wanted was a 10 millimetre hole!
    They actually wanted the HOLE and the drill bit was just a means to an end.

    But did they really want the HOLE? Or was there something else?

    Yes you are right ... they did not really want the hole even.
    So what did they really want?

    This is critical for you to understand so pay attention!!!

    What they all really wanted was what the 10 millimetre hole would do for them and how that would make them feel ... true?

    They wanted to build a Tree House for their kids so they could feel good watching their kids have fun.

    Maybe they wanted to hang a picture of a loved one.

    There is always some end benefit that people are looking for ... which always has some emotional pull attached.

    Why am I telling you this?

    Well chances are good you have been marketing Drill Bits! You have been ignoring the Hole in your marketing which is why it is ineffective.

    The Accountant talks about how long he has been in business, what qualifications he has, the services he provides and has a nice picture of his office.

    Who cares?

    The Life Coaches website explains what coaching is, how it works, answers the FAQ's on coaching, explains how a life coaching session works blah blah blah ...

    YAWN !!!!

    Here is the harsh reality ... no one wants your Drill BIT!

    No one wants a bookkeeper ... BUT millions of people want what a professional bookkeeper can help them achieve.

    Similarly, you ask about the best accounting software to use. Most people talk about ease record keeping, tax and GST, but these compliance issues are just the tip. What you really want is more than a measure of profit and compliance reporting (tax and GST), but also break down of activities into more meaningful detail for management purposes, along with budgeting and forecasting, Ratios and KPI’s. Even more than that - you want the comfort of knowing your records are right, the security of knowing you comply with ATO requirements, the reassurance of being in control of your business, the satisfaction of seeing measured results of your business growth.

    So...Cashflow may make the data entry simpler for you, but does it do more than report P&L, and tax and GST reporting? If so, do you understand how to get it? To use this information? When it comes to the data entry, do you understand how to properly enter your transactions and code for GST?

    Many of you actually do a pretty reasonable job at doing your own bookwork! But at what cost? Time away from family or work? Is this time without value? Look beyond what you might save by doing it yourself, and consider the cost...

    Whatever software is used, most small business owners wear so many 'hats', the last thing they should be doing is their own bookkeeping - especially without bookkeeping or accounting experience or instruction.

    I suggest that less than half a percent of lawnies engage a professional bookkeeper (not including kitchen table mums), so will be forever unaware of the value they can provide in helping business to thrive. The ones who are thriving most are generally the ones who free themselves of the tedium of their bookwork so they can focus on building and working their business.

    Is this a plug for bookkeeping? - Yes
    Is this a plug for me to do your books? - No, I'm aiming for a very different market.

    Nonetheless, as someone who operated a successful lawnie business for six years, I am better equipped than most bookies to be of value to you.

    Sp...will Cashflow make you feel good?
    David
    Mr Sparkle Car Spa

  9. #129
    Junior Member Fresh_Cut's Avatar
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    Default Re: David's bookkeeping corner.

    David, I gotta say that your tips have been nothing short of amazing, keep them coming!!

  10. #130
    Junior Member Fresh_Cut's Avatar
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    Default Re: David's bookkeeping corner.

    Hey David,

    Whats the best method of working out running costs of equipment you haven't purchased yet??

  11. #131
    Senior Member glassngrass's Avatar
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    Default Re: David's bookkeeping corner.

    Quote Originally Posted by Fresh_Cut View Post
    Hey David,
    Whats the best method of working out running costs of equipment you haven't purchased yet??
    Thanks for your question, it's a good one.

    There are a few ways to work it out, however I suggest that cost per hour is one that is easy to relate to.

    What are the component costs of running your lawn mower?
    The first expense is obvious - fuel.
    If your mower consumes, say, 1.5 litres and hour, then the fuel cost would be perhaps $2.00 per hour
    Service - oil and filter
    If these cost you $20 to replace every 40 hours, that's another 50 cents per hour
    Consumables - blades. If you get these cheap thru indi, a set of four with spring washer, nuts and bolts for your 196 might cost you $15. If these were replaced every 40 hours, cost would be $0.40/hour
    Repairs - a new machine may not need any for six-twelve months, but this will certainly increase over time, which is why many trade their machine in after two seasons (perhaps three). Down time is more expensive than repairs, and an old machine that blows smoke has little trade in value.
    For the sake of calculating running costs, depreciation is not considered here.
    Depending on use, I suggest you could allow $400 for repairs over two years - a new flap, two flap springs, wheels and bearings, blade carrier or two, throttle cable or two, a lost/stolen/damaged catcher.
    If your two year old mower worked, say 2,000 hours, thats $400/2,000=$0.20/hour.
    So...$2.00 + $0.50 + $0.40 + $0.20 = $3.10/hour running cost
    This doesn't sound a lot - really, it's not high, but should certainly be considered when quoting.
    After incidentals, you might round up to $5/hour running costs on your 196

    The true operating cost is more than just running cost.

    Okay - you service your equipment regularly yourself - is that at no cost? the hour you spend each fortnight doing oil change, replace air filter and change blades, lubricate throttle cable and linkages. If that is an hour your could have otherwise earned $40 - then that's another $1/hour cost. If it's an hour at night away from your family - how do you put a value on that?

    Did you borrow $900 on your VISA card for your new 196?
    If so, then add interest incurred on $900 over, otherwise add lost interest you might otherwise have earned in a savings account (or reduced interest on your mortgage) over 2 years and divided by expected life of 2,000 hours.
    Also depreciation - you may have paid $900 new, but may only get $300 trade in. So divide $600 ($900-$300) by 2,000 hours = $0.30/hour

    A big part of the equation is the usefull life - expected number of hours you'll get from your machine. This can vary significantly from actual. eg. That tow ball you hit that was hidden in long grass snaps your drive shaft.
    You got too busy to change the oil and air filter? - this will cost you with premature wear and tear on your equipment and reduced lifespan much greater that cost of filters and oil!
    That post you hit hard with the wheel that bends your front axle? Care of your equipment has a real impact on your equipment lifespan.
    Downtime (lost earnings) while waiting for repairs to your machine, or while fixing yourself.

    The running cost will also vary depending on things like :
    1. how hard the machine works (tall, wet grass, or maintained lawns)
    2. the operator (owners are more careful with equipment than employees)

    While the running costs of a 196 might be under $5, the true operating cost may be closer to $10/hour

    The above is just a guide. it is impossible to know with certainty the running cost of an item, especially if you haven't purchased it yet! Really, it's the less used things that cost more per hour - because they get much less hours used! eg. blower and chainsaw

    In true politician style I've given a lot of 'depends on'...
    Still, I hope the above gives you an idea on the methodology of working this out, regardless of whether it is a mower, chainsaw, wippy - whatever!

    Something I have noticed - profitable operators specialise - some buy a tractor and slash, others in acreages with a ride on, most a 196 or 216. So as to not miss out on work, some buy lots of different machinery - however we can only operate one of these at a time, and this means a higher value invested in machinery that sits idle more often.

    I would suggest the most profitable operators determine which segment of the market they really want, and then target that segment rather than trying to be all things to everybody.

    I hope this is of some value to you.
    David
    Mr Sparkle Car Spa

  12. #132
    Junior Member Fresh_Cut's Avatar
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    Default Re: David's bookkeeping corner.

    David, that was awesome!! Your an absolute kingpin at this, it's been really helpful, thank you!
    Fresh_Cut Better known simply as "Chris"

    Will have the business on the road soon..

  13. #133
    Senior Member 4 Gardens's Avatar
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    Default Re: David's bookkeeping corner.

    Hi David,

    With less than 2 weeks until EOFY what are you top 5 last minute tips?

    Thanks
    Andrew

  14. #134
    Senior Member glassngrass's Avatar
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    Default Pre-June 30 tax tips that can save you money!

    With June 30 closing in, here's a short list of tips that could save your business cash and make sure that you don’t pay more tax than necessary.

    Forewarned is Forearmed! These will need to be addressed ‘before June 30‘ in order to take full advantage of this knowledge. This is a busy time of year for all of us, so ask your accountant/tax agent quickkly if you’d like some help with preparing for the EOFY!?

    Paying directors’ fees or bonuses to your team?
    If you intend to pay Directors’ fees or bonuses to your team, you can claim the deduction in this financial year providing the company is fully committed before 30 June. You need to have evidence of this, which could include a director’s resolution and advice to the people affected. The payment does not have to be made this financial year to claim the deduction. The recipients only need to declare the income in the year they receive it, but the company can take the deduction in the year when the commitment is made. A good tax outcome, at both company and personal level.

    Taking cash out of the company
    If you have paid any cash to shareholders or paid expenses on their behalf, then these ‘debts’ need to be repaid to the company by the lodgement date for the company’s tax return, or an agreement needs to be in place to repay the debt. If existing agreements are in place, make sure that the minimum repayments due by the end of the financial year have been made. If the payments are being made from distributions, the dividends need to be declared and documented before the end of the financial year.

    Accelerate super
    Where possible, pay your employees’ superannuation contributions for the June quarter before the end of June. This way, you can claim the deduction now rather than waiting another 12 months.

    If you’re a Director of the company, you can also top up your own super contributions. Just make sure you don’t breach the contribution cap limits.

    Superannuation contributions are deductible in the year that the contribution is received by the trustee. Be sure to check how long your payment method takes to process – if you’re paying just before the end of the financial year, the payment may not be received by the Trustees until the new financial year – therefore, the deduction for the contribution cannot be claimed this financial year.

    Making the most of plant & equipment deductions

    Take a look at your asset register. If you have any obsolete plant & equipment that has no value and you are unlikely to use it in the new financial year, you might be able to claim the remaining tax written down value. You need to scrap the asset before June 30.

    If you operate a small business with a turnover under $2 million, you might be able to claim an immediate deduction for the cost of certain assets under $1,000.

    Got bad debts?
    Very few businesses survived the GFC without having a few bad debts. You know those customers who moved through the cycle from being friendly and upbeat “yes, we’ll pay that by the end of the week” to being downright cranky “we said we’d pay you!” to just being unavailable “…he’s not here right now.” If you have tried everything to recover the debt and you are sure there is no hope of being paid, you can write-off the debt this financial year and claim it as a deduction. The debt needs to be physically written off to take the write off. This means writing back through your debtors ledger. For any large debts, a director’s resolution could be a good idea.

    Trust distributions
    If you are using a trust structure, then try and complete the appointment of trust income before June 30. This is a resolution by the trustee as to who the beneficiaries of the trust income will be. Given the mix of personal tax rates and the company rate there is some good tax planning available here. Where you have any corporate beneficiaries then please talk to your accountant about your plans. There have been some changes introduced by the ATO and we want to ensure that you aren’t caught with any problems here.

    More to follow
    David
    Mr Sparkle Car Spa

  15. #135
    Senior Member glassngrass's Avatar
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    Default June 30 is coming...

    It is only 7 weeks until the end of the financial year. Are you ready? And have you reviewed your tax position to make sure you don’t pay more tax than you need to?
    As a guide the following tips will help you reduce your tax liability and boost your bank balance:

    • Defer income prior to June 30
    • Prepay post June expenses prior to June 30
    • Review your investment performance to take advantage of any under-performers
    • Consider contributing up to $1,000 into super (the Govt may pay an additional $1,500)
    • Businesses should do a stock take to enable stock write-offs
    • Companies should consider Directors Fees & Bonuses
    • Companies should review any shareholder/employee loans
    • Businesses with losses should ensure that they meet the noncommercial loss tests
    • Ensure that any superannuation is paid & received by the super fund prior to June 30
    • All salary packages should be reviewed in light of the tax cuts
    • All businesses and investors should review their business/investment structure and the alternatives available
    • Review your business & personal budget, if you have one (If you don’t have one, get started!)


    But wait..there's more....(tomorrow)
    David
    Mr Sparkle Car Spa

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