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'It's Budget Love !'

Right about now, the government is 'framing the budget'. In the lead up there will be speculation from the opposition and from commentators. There will be selective leaks then there will be surprises on Budget night.

The government is subject to forces that we cannot see or understand in total. The states, the lobby groups, the electorates all persuade the government to consider their case and to spend (or not to cut) accordingly. It is, and always has been, a system of persuasion and most likely if you don't ask, you don't get. There are huge consequences for industry and the population written by the pen of government.

For a small portion of the population (myself included) it's an interesting time and culminates on the first Tuesday in May when my own family allows me space to watch and listen to Budget night. They still shake their heads and mutter something about 'your kidding' or 'what the...' but all I can hear is the Treasurer saying 'Speaker, I now move that the Bill be read a second time'.

Road Trip !

The Small Biz Bus is on the road and heading our way. The NSW Minister for Small business, Katrina Hodgkinson, has announced the dates. For the South Coast it will be;

Nowra Junction Court Wednesday 5th march 9 to 3 and Ulladulla Plaza Thursday 6th march 9 to 3.

It's a contemporary version of the "We're from the Government and we're here to help you" but in a more pragmatic and less bureaucratic way.

Do yourself and your business a favour and tap into this resource. It may even be a chance to give some feedback in terms of what you would like to see in State Government assistance.

To book an appointment visit;

www.smallbusiness.nsw.gov.au/hop-on-the-small-biz-bus



Goodbye MYOB - Hello Xero

From July last year we introduced clients to a new online accounting solution - Xero.

Xero has significant advantages over desk based software (MYOB, QuickBooks etc). You get your bank statements automatically fed into the system.

Because your information is stored securely on line (in the 'cloud'), there's no back ups required and no updates required. It's all done automatically.

The two biggest differences are in time saving and ease of use - bearing in mind you can access your data anywhere, anytime, any device.

I was discussing with a client the other day her experience with Xero, she said

 "Phil, it's fantastic. I just did my BAS with a coffee in my hand. By the time the coffee was finished, so was the BAS!"

Do yourself a favour and check out the website;

www.xero.com

Pressure Test

Recent reports point to the housing market gaining a bit of heat. Demand is increasing and so are prices. The Sydney market is showing gains across all price ranges. Locally there is anecdotal evidence suggesting that things are on the move. A local agent told me last weekend that the most demand is in the 200k to 450k range. This would usually involve the first home buyers market and this is borne out by a recent increase in first home buyer activity.

Being a conservative, cardigan wearing accountant - my worry is this. Most first timers have no memory of high interest rates. They have not experienced that kind of pressure test on their household budget. We cannot rely on banks to be the gatekeepers to be prudent lenders, they have failed this test in the past spectacularly. In fact bad lending practises were the cause of the global GFC.

Home buyers beware. Interest rates currently have more potential to increase than decrease. Please seek professional financial advice and ask your adviser to pressure test your finances.

Child care costs

This morning the Tax Institute of Australia has called for the tax deductibility of child care. If this is been reported correctly, and I've checked their website unsuccessfully for clarification, it's not the way to approach it. A tax deduction will only generate a benefit if there is significant taxable income. That benefit can range from nil to 46.5%. Essentially it's a reverse income test. That is too say the more you earn, the more benefit you will get.

The other way to approach it is a benefit by way of a refundable tax offset. This is a flat rate and the benefit is the same regardless of income. Whether it's income tested or not is another matter. The point is the incentive should be delivered in even amounts, not as an advantage for high income earners and possibly nothing for lower incomes.

Why Super ?

Why Super ? Why indeed.

The recent history of superannuation in Australia shows that successive governments over successive budgets have encouraged Australians to step up their super.

There has always been the tax incentive to put money into super, the leave it there then withdraw it.

A common myth is that 'it's taxed on the way in, it's taxed in there then taxed on the way out ! What's the point?'

The point is that yes, it's taxed on the way in at 15% but you receive a tax concession of up to 45%.

It's taxed during in there at 15% but that's better than in your hands and being taxed at up to 45%.

Now here's the tax fact that supercharged the super incentive. In retirement, there is no tax on the way out.

This was a Howard government piece of legislation and stems from their 1996 election campaign.

Although not introduced until much later, it was part of big changes made to the tax landscape.

In fact in that election campaign, John Howard visited Sanctuary Point and spoke at the Sanctuary Point Community Centre.

Amongst other things he promised to remove age pensioners from the tax system and remove taxation from super in retirement.

Although it took awhile, both promises were filled.


Price is Objective, Value is Subjective

What? What do you mean Price is Objective, Value is Subjective?
Just this morning I cycled with a mate and somehow started a discussion on Accountancy fees. Now work topics like this are usually out of bounds (take a drop and a penalty and try again) and we talk about men's health, footy and family. Anyways he started it.....
Turns out that he has heard from others that they complain about fees of a $1,000. He pays something more than this and is happy to do it because he appreciates not only the amount of work involved but the value of the advice he gets...and that's the crunch.
If your accountant can not only do the compliance work(lodging returns) but can generate real value from identifying problem areas and giving great advice,then the benefits can last many years.
The advice can range from financing,business development, tax strategies,accounting software and more.
Make use of your accountant's wealth of knowledge and get value for money.

In 2014, chances are you wil come up with a 'big ticket' decision.
Whether it's to sell an investment or buy one.
Whether it's to refinance or whether it's to start a business.
Most people have the common sense to consult their accountant about possible tax consequences of that decision - some do not.
Unfortunately I see many examples of disastrous consequences of uninformed decisions.
I'm prompted to mention this because at the very moment I have clients who sold 2 properties during the 12/13 year without advice as to the timing of contract dates and capital gains tax. There is no going back in time and they will have a hefty bill.
A simple phone call to discuss the matter ahead of the transaction would have saved them $ 000.

Most 'big ticket' decisions have tax planning opportunities.
Make a resolution to 'Dial before you dig (yourself deeper)'

Family Budget Vs Federal Budget

Hands up if you have a family budget. Keep your hands up if you are in surplus. Hmmm, not many left. But don't worry, the problem you have in 'making it all add up' is a problem for our Federal Government as well (and State and Local). The very big difference is that unlike households, there is a change of the Treasurer every so often. It's like swapping household budgets with someone else. You take on the previous household's budget. You then get permission from the bank (the senate) to increase your mortgage and spend a bit more to keep the new family (voters) happy otherwise they'll be unhappy and throw you out.

What you then do is pin all your hopes on a future wage rise (boom economy) to pay off the new debt. If that doesn't happen, then it'll be up to the new person in charge to clean it up.

Yes the Government budget works completely differently to the Family budget. As a family/individual we must take ongoing responsibility for our spending. We have some discretion in how much we earn but a lot more in how we spend. Good luck to all of us, especially if you've got teenage kids !

We wish you many happy 'I' returns !