Are you a small business owner? Here are 5 issues you should discuss with your accountant.
Simplified Tax System
Since July 2001 many businesses with a turnover of under $1 million per annum have been eligible to join the Simplified Tax System (STS). The STS is designed to reduce the compliance costs faced by small business.Businesses that elect to enter the STS enjoy more favourable depreciation rates and can avoid the requirement to perform an annual stock-take.
More importantly, an STS taxpayer can calculate its taxable income on a cash basis. For a business that carries trade debtors this can provide a significant cash flow advantage when it comes time to pay income tax.
Furthermore, more businesses will soon become eligible for the STS as the turnover threshold is to be extended to $2 million.
Remuneration of Owner
Is your business paying you wages or a salary? This type of remuneration is subject to PAYG withholding tax, superannuation, workers compensation premiums and potentially pay-roll tax.A properly structured loan from your business can not only provide a more tax-effective solution but can also improve your net cash-flow as well as increase your ability to create future wealth.
Business Structure
Setting-up the correct business structure is not simply a matter of choosing to operate as a company, trust, partnership or sole trader. An appropriate business structure should not only be effective from an income tax and capital gains tax point of view but should also provide asset protection.
If you are uncertain if you have the appropriate business structure, consider the following questions:
- If your business could not pay its debts would your personal assets be safe from creditors?
- If you were sued personally could you lose your business?
- If you wanted to buy an investment what name would you buy it in?
- Is the average rate of tax paid on your business profits greater than 30 per cent? (Be sure to consider any tax paid on remuneration provided to you and/or your partner).
Compliance Obligations
The compliance obligations of small business owners are greater than at any time in history. While small businesses can largely rely on accountants to assist them to comply with the obligations it is imperative that all small business owners are aware of all their obligations. Failure to meet obligations is having a real (and increasingly serious) financial impact on businesses, commonly in the form of interest and penalties.The following is a list of some of the major obligations. Do you understand these obligations and are you complying?
- Business activity statements
- Fringe benefits tax returns
- Superannuation for employees
- PAYG payment summaries
- Workers compensation insurance
- Annual review fee for companies
- Annual solvency resolution for company directors
- Payroll tax - Did you know if you operate in more than one state you need to register in each state?
Directors' duties
Being the director of your own company means far more than being in charge of your business. As a director you have a number of statutory and common law duties. If you do not fulfill these duties you can face serious financial penalties; even imprisonment.Did you know that one of the key duties of a director is to prevent a company incurring a debt while it is insolvent? If you were to allow your company to trade while it is was insolvent you could be held personally liable for the debts of the company.
It is imperative that you are aware of and fulfill all your duties as a director.