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Tax Tips for small businesses 2023

Common Tax Deductions for Small Business

Are you claiming all the business tax deductions that you are entitled to?

There are many expenses common to most small business, and there are other expenses that are specific to the nature of each industry and the goods or services that your business provides.

• Operating expenses include accounting, administration, advertising and marketing, office premises, office running expenses, trading stock, legal fees, repairs and maintenance, insurance and vehicle expenses.
• Employment expenses include salary and wages, fringe benefits, superannuation and training costs.
• Other operating expenses may include things specific to your business, for example point of sale systems, freight, professional membership fees, professional education, protective equipment, tools or specialised software.
• Capital expenses include machinery and equipment, vehicles, furniture and computers. Depreciation for these assets may also be deductible if the expense was not claimed immediately.

Expenses must relate to the running of the business and providing the goods or services that your business offers.

Some common expenses that are not deductible are fines and penalties, provisions for employee leave, donations to entities not registered as deductible gift recipients and some entertainment. Super and PAYGW are tax deductible when they are paid on time – but not if paid late!

There may be some expenses you want to check with us such as private usage of business vehicles or other equipment, prepaid expenses, bad debts, loss of stock and borrowing expenses. We’ll make sure to include all the deductions you’re entitled to.

What’s on the ATO Radar for Business Tax Returns?

• Businesses whose benchmarks fall significantly outside the ATO’s small business benchmarks.
• Work-related travel expenses – travel fares, accommodation, meals. The travel should be directly related to income producing activities and you need records to verify the travel claims.
• Motor vehicle expenses – keep records for fuel, repairs and servicing, finance arrangements, insurance and registration. Keep a logbook to record private travel.
• Fringe benefits – have you reported all benefits provided to employees?
• Superannuation – have you paid the superannuation guarantee on time to employees’ super funds? The ATO will examine your Single Touch Payroll records including superannuation payments.
• Instant asset write-off – the threshold remains at $150,000 this year, but there are rules about eligibility so talk to us to see if the asset deduction claims apply to your business.

Maximise Your Business Deductions

Remember to keep all your business records for at least five years, and payroll records for at least seven years. Companies must keep all records including director meeting minutes for at least seven years.

We’ll make sure you have time to plan for a tax bill, or if you are due a refund, you’ll get it within ten days of us lodging your tax return.

We’ll also check your business’s eligibility for concessions, offsets, incentives and rebates and make sure your business is calculating taxable income correctly, so you don’t pay more tax than you need to!

Claiming your bonus deduction for technology investment this year

A bonus deduction may be available in this upcoming tax return for expenses relating to undertaking a digital adoption for your business.

This bonus deduction is 20% of the costs you’ve incurred to support a digital adoption, including but not limited to:

Digital enabling items such as computer hardware and software, systems and services that form and facilitate the use of a computer network.

Digital media and marketing such as audio and visual content that can be created, accessed, stored and viewed on digital services, and

e-commerce items that support digital payment systems and online transactions.

The bonus deduction is capped at $20,000 per year, being 20% of $100,000 in costs. This bonus deduction is on top of the actual deduction that you’ll be able to claim for the items used in your business. The actual deduction may be an outright tax deduction due to the temporary full expensing rules that are currently in place.

Any eligible costs incurred from 7:30pm (AEDT) on 29 March 2022 to 30 June 2023 are included.

In June 2023, this measure became law. With 30 June 2023 fast approaching, you have one last opportunity to obtain an upgraded piece of equipment for your business which will give you that 20% bonus deduction.

Even though this leaves you with just a small amount of time to get a new asset, we have previously mentioned to you that the bonus deduction was likely to become law as the initial announcement was first made by the former Coalition government. It was then confirmed to be re-introduced as law by the current Labor government back in August 2022.

What you need to do

We will need to scrutinise your deductions for all digital upgrades over the past 15 months to ensure that we are getting the full bonus deduction to you. When you send in your year-end tax work and accounting file, make sure you attach all the invoices that you think will be eligible for this bonus deduction. To begin with, that would include all your new purchases listed within the 3 items above.

Along with this, we will also review your files and make sure that we see a copy of any invoices that we think are also eligible for the bonus deduction.

If you have any questions, please contact our office. We would be delighted to assist you further.

Your upcoming tax calendar for July and August

The start of the new financial year is upon us. For most of you, this means finalising your general ledger accounts in order to get the necessary information to us to prepare your final 2023 accounts and taxreturns.

However, it can be a time where we forget that our businesses have final obligations due in relation to the end of the financial year.

In order for you to be across your tax obligations, below are the key compliance dates coming up. Make sure these lodgments are up to date to avoid any interest and penalties.

If you have questions or need help with any of the following, we are here to help.

KEY TAX DATES – JULY/AUGUST 2023

• 14 July 2023 – Payment Summaries – Provide payment summaries to employees if you do not use Single Touch Payroll
• 21 July 2023 – GST – Monthly Activity Statement and payment for June
• 21 July 2023 – PAYG withheld – Monthly Activity Statement and payment for June
• 21 July 2023 – PAYG instalment – Activity Statement and payment for monthly reporters for June
• 28 July 2023 – GST – Quarterly Activity Statement and payment for the April to June 2023 quarter if you do not lodge with us
• 28 July 2023 – PAYG withheld, FBT instalment and PAYG instalment – Quarterly Activity Statement and payment for the April to June 2023 quarter if you do not lodge with us
• 28 July 2023 – Superannuation guarantee – Lodgment and payment of superannuation guarantee statement
• 14 August 2023 – PAYG withholding – Due date for lodgment of annual PAYG withholding report for employees
• 21 August 2023 – GST – Monthly Activity Statement and payment for July
• 21 August 2023 – PAYG withheld and PAYG instalment – Monthly Activity Statement and payment for July
• 25 August 2023 – BAS – Quarterly Activity Statement lodgment and payment due date for the April to June 2023 period if you are lodging with us
• 28 August 2023 – Taxable payments annual report – 2022–23 lodgment of taxable payments annual report if you are in the building and construction, courier, cleaning, road freight, information technology and security, investigation or surveillance industries and you pay contractors to complete work for you.

Anything keeping you up at night?

If you’re facing operational issues, tackling people challenges, or have health and safety questions, give us a call, email us or text us. We are here to help.

It’s tough at the top (and that’s why you need a business coach)

Being a business owner can be immensely rewarding. But it’s also a highly pressurised and stressful vocation to choose. The business journey can be full of pitfalls and challenges that make it more difficult to meet your goals and turn your enterprise into a success.

The good news is that you don’t have to travel this road alone. A business coach is your companion on the journey. A coach will help to shoulder some of the load, so you can get where you’re going faster and with all the personal and business support you might need.

The benefits of working with a business coach

Running a business is a learning experience. Each day will present a new opportunity or challenge, so it’s important to fast-track your learning and build on your own knowledge.

Engaging a business coach is one way to speed up this knowledge and growth process, while also having access to an independent and objective expert in your field. You may be the founder of a new startup, or an experienced entrepreneur with three business ventures under your belt. However experienced you are, it’s helpful to have a sounding board.

A business coach will:

• Listen to your concerns – when you work with a professional business coach or mentor, this gives you a chance to express your concerns and business challenges openly. A coach will listen and offer guidance without judgement, giving you an independent sounding board to bounce your ideas off and brainstorm new strategies.
• Know your goals and aspirations – a coach gets to know your goals and aspirations, both professionally and personally. Because of this, they’ll provide tailored advice and support to help you meet these goals and fulfil your long-term vision for the business.
• Understand the workings of your business – when a coach has a deep understanding of the intricacies of your business, this can be immensely valuable. This knowledge allows them to offer specific insights into your industry, identify potential blind spots and suggest strategies that align with your unique business model.
• Share their knowledge and expertise – collaborating with a coach or mentor gives you an opportunity to tap into their wealth of knowledge and industry expertise. Their experience helps to provide valuable insights, advice on best practice in your sector and innovative ideas to propel your business forward.
• Hold you to account and push the envelope – as the boss, there’s not always someone on hand to help you meet your business goals. Your business coach will hold you to account and can challenge you to step out of your comfort zone. They’ll push you to explore new possibilities, set ambitious goals and overcome obstacles, all of which helps you to drive your personal and professional growth as a leader.

Talk to us about our business coaching services

As your accounting adviser, we know your business better than anyone. And we also have the advantage of having worked closely with you to develop and refine your goals as a business leader. We’re perfectly placed to become both your business coach and your close adviser.

If you want to take your professional growth to the next level, we’d love to become your coach.

Get in touch to talk about business coaching.

How running a lean business model improves your cashflow and efficiency

Keeping your operational expenses under control, while also remaining efficient and meeting customer demand can be a challenge – one that can catch out many new business owners.

This is why running your enterprise using a lean business model is such a good idea. By keeping operations, stock and processes to a minimum, you reduce your outgoings, speed up efficiency and improve your cash position. But how does the lean model work?

5 core elements of a lean business model

In essence, a lean business model aims to eliminate waste in your operational and product manufacturing processes, while still allowing you to meet your customers’ needs.

Originally a methodology that came from the Toyota Motor Company in the 20th century, the aim of lean manufacturing is to cut back the processes to the bare minimum. This helps you streamline the production of goods, cut your operational expenses and still meet the demands of your customers – running the whole organisation in a lean, efficient and profitable manner.

Some core element of a lean model include:

1. Cost efficiency – cutting waste is central to the lean methodology. Applying lean allows you to reduce waste in the manufacturing process and minimise any unnecessary spending. This allows you to optimise your resources and allocate funds strategically.
2. Increased agility – with a lean approach in place, it’s far easier for the business to be both agile and flexible. This makes it easier to respond quickly to market changes, customer needs and emerging opportunities you spot in your sector.
3. Enhanced customer focus – promoting value is another core element of lean. By eliminating non-value-added activities, you can prioritise customer satisfaction and deliver tailored products or services that meet your customers’ exact needs.
4. Streamlined processes – lean methodologies streamline your workflows, reduce bottlenecks and enhance your overall operational efficiency. This all leads to improved productivity and shorter lead times, helping you quickly deliver your product to market.
5. Sustainable growth – running a lean business model promotes long-term sustainability. There’s a continuous focus on improvement, adaptability and financial stability, all of which helps to make you exceptionally competitive and ready to grow at pace.

Talk to us about implementing a lean strategy

If you want to turn your manufacturing business into a cost-effective, scalable enterprise, moving to a lean business is a big step in the right direction.

Talk to us about your current production and operational strategies. Let’s see how switching to a lean methodology will set you on the path to a more efficient and profitable future.

Get in touch to talk about lean strategies.

Claiming your bonus deduction for technology investment in the 2022–23 tax return

A bonus deduction may be available in this upcoming tax return for expenses relating to undertaking a digital adoption for your business.

This bonus deduction is 20% of the costs you’ve incurred to support a digital adoption, including but not limited to:

Digital enabling items such as computer hardware and software, systems and services that form and facilitate the use of a computer network.

Digital media and marketing such as audio and visual content that can be created, accessed, stored and viewed on digital services, and

e-commerce items that support digital payment systems and online transactions.

Cyber security systems, backup management and monitoring services.

The bonus deduction is capped at $20,000 per year, being 20% of $100,000 in costs. This bonus deduction is on top of the actual deduction that you’ll be able to claim for the items used in your business. The actual deduction may be an outright tax deduction due to the temporary full expensing rules that are currently in place.

Any eligible costs incurred from 7:30pm (AEDT) on 29 March 2022 to 30 June 2023 are included.

In June 2023 this measure became law, the eligibility window was small, however, we previously informed you that the bonus deduction was likely to become law as the initial announcement was first made by the former Coalition government. It was then confirmed to be re-introduced as law by the current Labor government back in August 2022.

What you need to do

We will scrutinise your deductions for all digital upgrades over the eligibility period to ensure that we are getting you the full bonus deduction to you. When you send in your year-end tax work and accounting file, make sure you attach all the invoices that you think will be eligible for this bonus deduction. To begin with, that would include all your new purchases listed within the 4 items above.

Along with this, we will also review your files and make sure that we see a copy of any invoices that we think are also eligible for the bonus deduction.

Other matters

If you are entitled to a research and development tax incentive (RDTI) notional deduction, note that it is not covered under taxation law, therefore, you may be entitled to claim both the bonus deduction as well as the R&D notional deduction.

If you have any questions, please contact our office. We would be delighted to assist you further.

Your PAYG withholding statement (IAS) is due on the 21st

Some employers need to pay PAYG withholding liabilities to the ATO monthly, even if the BAS is lodged quarterly. The monthly instalment activity statement (IAS) and payment is due on the 21st, whether you are lodging your own statement or using our lodgement service.

Things to review before finalising the IAS:

• Have you allocated all payroll related bank transactions to the correct accounts?
• Have you checked your payroll detail reports for accuracy?
• Have you classified the different payroll items such as allowances, bonuses or director fees correctly?
• Have you included relevant payroll items or categories at W1 reporting field?
• Do you need to include amounts such as no ABN withholding?
• Have you had to prepare any special pay runs such as termination payments that require manual tax calculation?

Checking the accuracy of the IAS figures each month ensures your statements are more likely to be accurate and less likely to need adjustments at the end of the financial year. This means that issuing annual payment summaries to employees and preparing your ATO payment summary annual report will be straightforward and prompt.

We can assist with preparing your monthly IAS or review your business accounting systems to make sure you are correctly categorising and reporting all pay items.

What’s the difference between statutory and management accounts?

As a business owner, you know you need to produce accounts – that’s a given. But do you know the difference between statutory accounts and management accounts?

Your statutory and management accounts have two very separate purposes, and producing both kinds is good practice for any business that wants a handle on its numbers.

Let’s take a look at the key differences and why you need these specific kinds of accounting.

1. What are statutory accounts?

Statutory accounts are a legal requirement for any limited company or partnership. They’re the mandatory annual accounts you MUST produce, submit and file as a company. As such, statutory accounts are a regulatory requirement. You and your fellow company directors have a responsibility to ensure that these accounts are filed on time and in full.

Your statutory accounts will usually include a:

• Directors’ report – giving an overview of business strategy and performance, key achievements and the company’s overall financial position. It will also cover shareholder information and dividends alongside broader information about the company.
• Profit and loss statement (P&L) – to outline the income coming into the business, and the expenditure going out over the course of the annual period. This is a key indicator of the profitability of the business during the preceding year.
• Balance sheet – to give a snapshot in time of the assets, equity and liabilities in the business. This is an indication of the financial health of the company on the date that the accounts are produced, a useful report for lenders and investors to review.
• Cashflow statement – so you can see your cash inflows and outflows over the course of the period. In an ideal scenario, you want your inflows to outweigh your outflows. This is known as being in a positive cashflow position.
• Notes to the Financial Statements – which contain supplementary details on your accounting policies, significant estimates, disclosures, and other relevant information for a comprehensive understanding of the financial statements.

2. What are management accounts?

Unlike statutory accounts, management accounts are not a mandatory, legal requirement. But producing management accounts is still good practice for any growing business.

Management accounts are produced to keep you and your top team on top of the business. They will generally be a summary of all the most important financial information and will be run every month or every quarter, depending on your business. This mix of numbers, data and metrics is then used to inform your business thinking and your decision-making process.

A regular management information pack will include:

• Sales performance and analysis
• Financial statements (profit and loss, balance sheet, cashflow statements etc)
• Key performance indicators (KPIs) tracking
• Budget versus actual comparisons
• Inventory and stock levels
• Customer and supplier analysis
• Cashflow forecasts for the upcoming period
• Operational metrics re your production and delivery
• Project updates re your main jobs
• Management commentary and insights.

Talk to us about handling all your accounting needs

Having your statutory and management accounts at your fingertips gives you the best possible overview of your company’s past, present and future performance. Filing statutory accounts keeps you compliant with the law, while having deep-dive management accounts gives you the data and evidence for making properly informed business decisions.

We’ll help you produce your statutory accounts and tick all the compliance boxes. And we’ll also generate tailored management accounts to keep you on the ball with your numbers.

Get in touch to talk about your accounts.

Can ChatGPT replace your marketing team?

Unless you’ve been living under a rock, you’ll have heard about the ascendant rise of Open AI’s ChatGPT and GPT-4 (plus other similar tools). These natural language processing tools have brought AI content writing to the masses – but does this mean that your content marketing team is now defunct?

The short is no. For a start, great marketing has always been much more than just promotion. The traditional 4 P’s include Promotion but also, Product, Price, and Place. When these three work together they provide value for the customer and for the company.

But the longer answer is that AI tools are very likely to play some kind of part in your customer communications, sales, and marketing going forward.

Here’s our lowdown on what ChatGPT and GPT-4 can do for your marketing.

What do we mean by AI content writing?

ChatGPT and the new breed of large language models (LLMs) are artificial intelligence tools. They use a chatbot-style interface to answer your questions, provide you with information, or (in the use case we’re interested in) write simple or complex written content for you.

These LLMs have access to a giant data source of information, languages, and writing styles. By entering a suitable prompt into the chat window, you can ask your AI tool to write anything from a blog post to a business email. And you’ll get the results in seconds.

You quickly get access to well-written content and can produce more content, more quickly.

Does AI content writing replace your content marketing role/s?

In short, ChatGPT is a tool that enables content production but is not a replacement for an experienced, professional marketing writer. Yes, you will get decent quality content as an output, but the very nature of AI means that the content will be serviceable and generic, rather than exciting and on brand. What humans love about humans is personality, imperfection and uniqueness. Also, while the A.I. may give an appearance of understanding the topic, what it produces may be inaccurate, and contain biases.

If you want your content to really pop, the output from ChatGPT is going to need some tweaking and editing to make it stand out among the sea of content that washes past each day.

A good marketing writer will:

• Review the ChatGPT output and look for opportunities to rewrite the content
• Fact check any claims and add stats, quotes and factual links to more information
• Bring the text in line with your own brand writing style and tone of voice
• Add some human personality and make the content less ‘vanilla’.

ChatGPT won’t write your marketing content for you. It still requires you and your marketing team to come up with the themes and topics for your blogs, newsletters and customer-facing advertising. But AI content writing tools CAN be an extremely useful productivity tool.

For example, ChatGPT can:

• Draft out blog outlines – ChatGPT will happily churn out detailed blog outlines, based on your chosen theme and prompt (the instruction you give to the AI). You’ll still need to edit and tailor this content to make it your own, but you’ll be able to produce a far greater number of blogs in much less time. It’s an easier way to keep that content rolling!
• Sketch out sales emails – ChatGPT can also help with your sales emails. Ask the AI to write you a short, snappy 200-word email that summarises the main selling points for a particular audience and it will turn it around in the blink of an eye. The content will still need a little tweaking, but the main text is there in a second.
• Write product summaries – If you point it to a link for your product/service pages, ChatGPT can summarise the key points and deliver a short, snappy summary of the key functions or customer benefits. This allows you to very quickly pull together product one-pagers and flyers for events or for you to send out to prospects.
• Come up with web content – if your website needs an update, ChatGPT can turn your product summaries into eye-catching web copy. Tell the AI that you want a landing page, or a product page and it will generate well-crafted copy in no time. As always, you will need to review and edit the output, but it makes the process so much faster.
• Write social content in different formats – when you want to promote your blogs and web content, ChatGPT is an expert at generating content for social media posts, tailored to the character counts or SEO requirements of platforms like Facebook, Twitter and LinkedIn etc.

Combining AI and a content marketing expert will supercharge your content

If you want to create original, fresh content and engaging messaging, you 100% still need a person. AI content-writing software is a tool to be used to streamline the process and make things consistent. But good ideas still come from human brains, not from an algorithm.

And a final note – Chat GPT is not confidential and also may not delete specific prompts from your history, so don’t share personal or sensitive information with Chat GPT.

Avoid ATO’S increased tax penalties – reminders and updates

Announced as part of the 2023–24 Federal budget, increased funding has been provided to the ATO to scrutinise taxpayers who have high-value outstanding debts of over $100,000 and aged debts older than two years where those taxpayers are:

• public and multinational groups with an aggregate turnover of over $10 million, or
• privately owned groups or individuals controlling net wealth of over $5 million.

Increased penalty rates

After a recent increase in January 2023 from $222 to $275, Commonwealth penalty unit rate has witnessed yet another hike from 1 July 2023 and currently sits at $313 per unit. This means that if you fall behind on your tax lodgements you can expect the financial penalties to increase substantially.

Penalties may be levied on late lodgments of returns and reports that include but are not limited to:

• Activity statements
• Income tax returns
• FBT returns
• PAYG withholding annual reports
• Single touch payroll reports
• Annual GST returns and information reports
• Taxable payment annual reports.

With the increased rates now in effect, a small business can expect to pay base penalties for failure-to-lodge returns ranging anywhere between $313 (1 penalty units) to $1,565 (5 penalty units), one unit for every 28 days the lodgment is overdue.

Small business lodgment penalty amnesty

The ATO is encouraging small businesses that have overdue income tax returns, fringe benefits tax returns or business activity statements etc. to take advantage of a lodgment amnesty that will run until 31 December 2023.

Announced in the 2023–24 Budget, the amnesty applies to tax obligations that were originally due between 1 December 2019 and 28 February 2022 and has been available since 1 June 2023.

To be eligible for the amnesty, the small business must be an entity with an aggregated turnover of less than $10 million at the time the original lodgment was due.

Next steps

To avoid being penalised at the revised higher rates for failing to lodge returns and reports, ensure you collate and send us all necessary information well before the lodgment due date so we can complete your lodgments on time.

If you anticipate delays, best practice is to engage with the ATO and tell them your situation. We can assist you with requesting an extension in lodgment due date, applying for remissions or if necessary, taking out a payment plan to pay off your tax debts.

Small businesses can avail the lodgment penalty amnesty and lodge eligible overdue forms before 31 December 2023 and the ATO will automatically remit any associated failure-to-lodge penalties.

Other matters

Should you have any queries in relation to this matter, please feel free to contact our office.