Should you register for GST?

By law you are required to register for GST if:

• Your business or enterprise has a gross business income of $75 000 or more.
• Your non-profit organisation has a gross business income of $150 000 per year or more.
• You provide taxi or limousine services (both owner drivers or if you lease or rent a taxi) regardless of your gross business income.
• You want to claim fuel tax credits for your business or enterprise.

If your business income is under the legal threshold you’re not required to register for GST, however you may want to consider the following:

Advantages of registering for GST:

• You can claim back the GST on all your business expenses, this may be particularly helpful when purchasing expensive items such as computers or work vehicles.
• If the annual income of your business is less than $2 million you may be able to access GST concessions including:
  • Accounting for GST on a cash basis, meaning you are only required to account for GST once payment is received.
  • Paying GST by instalments, which you can vary on a quarterly basis.
  • Annual apportionment of GST input tax credits, meaning if you are using some items for private use you can claim the full GST credits and make one single adjustment for the percentage of private use at the end of the financial year.
• GST registration can provide a small business with credibility and you may find that some businesses also prefer to purchase from GST-registered businesses because they can claim back the GST.

Considerations when registering for GST:

• GST registration results in more administrative tasks, including lodging Business Activity Statements (BAS) on a monthly or quarterly basis. Additional reporting can be time consuming and may outweigh the cost benefit.
• If your planned annual income is below the $75,000 threshold, not registering for GST means your prices will effectively be 10% cheaper than your GST-registered competitors. Conversely, if you charge the same as your GST-registered competitors, you may benefit from a greater profit margin.

Every business and their circumstances are different, talk to a YML Tax accountant today to find out whether registering for GST will suit your individual situation.

Matters to Consider Before Setting Up an SMSF

A Self-Managed Superannuation Fund (SMSF) is essentially a do-it-yourself super plan that can have up to four members. One of the main motivations for setting up an SMSF is to be in control of your own fund and how investments are made. As well as the development of a sound investment strategy, running a fund also requires certain skills in terms of administrative, financial and legal matters.

If you are thinking about setting up your own SMSF, here are some of the factors to consider.

Skills and responsibilities

• Your role – with an SMSF, you need to take on the role of trustee or director, which comes with legal obligations and considerable responsibilities, including personal responsibility for compliance.
• Investment skills – you will need to have the time and skills to research investment options, to understand how investment works and to develop a sound long-term strategy.
• Administration – there is a considerable amount of administration required in running a fund, including record-keeping, taxation, compliance, keeping up with government legislative changes regarding super and tax, and so on. You also need to be able to engage directly with the ATO.

If you wish to set up your own fund but lack the skills or time required to run it, you may of course be able to hire someone else to do the work for you.

Financial matters

• Enough money to invest – it’s usually recommended you should have at least $200,000 to invest to make an SMSF worthwhile in terms of the fees involved. Investment options may include property, shares, term deposits, managed funds, artworks, or even antiques.
• Fees – these are likely to include payments for independent audits, annual returns, asset valuations, legal matters, insurance, and professional advice. You need to bear in mind that the fees involved may be proportionally higher than for an industry fund.
• Borrowing to invest – since 2007, it has been possible for SMSFs to borrow to invest in assets such as property, shares, and land. There are however some stringent rules around this that you need to be aware of – such as the single-asset rule per borrowing arrangement, and restrictions on asset improvements.

Insurance

• Life insurances – super funds generally offer insurance to members in terms of life, disability, accident and income protection cover, and also usually have the advantage of group buying power which can lower the premiums for members. SMSFs are obliged to offer life insurance to members, and in this case you would need to purchase your own insurance cover.
• Other insurance – cover should also be taken out for assets such as property to provide financial protection.

General questions to ask yourself before going ahead

• How well will your SMSF be able to outperform other funds?
• Do you have the skills, time and motivation required (or alternatively the means to pay someone else) to administer the fund?
• What other options are available? For instance, if you are not happy with the performance of a fund you are a member of, you might be able to switch to a more suitable one. If it is more control over investments you want, some funds allow you to have input into how your money is invested.

If you enjoy investing and have strong skills in financial management and a good grasp of legal matters, an SMSF may be a good option for you. On the other hand, if you lack the skills and time but would still like to set up your own fund, consider utilising the expertise of an SMSF accounting firm in Sydney to administer the fund on your behalf.

Does your super fund provide enough life insurance cover?

According to research by Lifewise.org - 50% of Industry Super Fund members are under-insured by $100,000 for life insurance. While insurance through super can be cheaper and have certain tax advantages, many funds only provide the basic level of cover, which may not necessarily reflect your individual circumstances.

• Life Insurance - which can help provide for your loved ones if you die.
• Total & Permanent Disability Insurance (TPD) - which can replace your income if you are injured and can’t ever work again.
• Income Protection Insurance - which can pay you a percentage of your salary if an injury or illness results in you not working for a period of time.

• How much money will my family require to cover household expenses and immediate bills such as funeral expenses?
• How much money will my family require to pay off all debts – including credit cards and mortgage?
• What lifestyle aspirations do I have for my family and what support do I want to provide for my dependents?

4 reasons to consider refinancing your home loan

If you’ve had your home loan for a number of years, it’s likely that your personal and financial situation has changed and now could be a good time to investigate the option of refinancing. Here are four reasons to consider refinancing your home loan:

1. Reduce your monthly repayments:
   Refinancing to a new lender or loan may let you take advantage of lower interest rates on offer. More competitive interest rates can help lower your monthly mortgage repayments.
2. Use the equity in your home:
   Refinancing allows you to access the equity in your home. You can get a line of credit based on the value of your home and the amount that you have already paid on your mortgage. This is a popular way to renovate an existing property or access money to make an investment or big purchase.
3. Consolidate debts:
   Refinancing can help you to consolidate debts such as a personal loan, car loan or credit card into your mortgage, to take advantage of the lower rate typical of a home loan.
4. Switch between variable and fixed rate loans:
   If you like the certainty that your home loan repayments will stay the same over a period of time, you may wish to switch to a fixed rate loan. Or you may decide to take advantage of a lower variable rate loan if you are willing to accept the risk that rates could increase in the future.

If you’re considering refinancing your home loan, the YML Finance Team offers a range of refinancing and consolidation loans.

Succession plan basics for small business

Even if you’re not planning to retire for many years, it’s still important to have a strategy for exiting your business. According to a recent report undertaken across more than 1,200 Australian SME businesses, 35% of business owners have no ultimate exit plan.

The importance of a succession plan
Let’s face it – nothing in life is permanent and one day your life as a business owner will come to an end. This may be due to retirement, but other factors to consider are ill health, accident, death or simply because you’ve decided to move on to something new. A well-structured succession strategy helps mitigate a wide range of risks and ensures, among other things, the future stability and success of your business. While all succession plans vary in complexity and objectives, there are some key questions all business owners should consider.

• Who will your successor be?
  Will your successor be a family member, a business partner or someone external to the business? It’s important that the potential successor is provided with appropriate training and given a reasonable time period to learn the main aspects of the business.
• What is your exit strategy?
  Will you retire altogether or continue to be involved on a part-time basis? If the latter, what will your involvement entail and for how long?
• What are the financial considerations?
  What is the current market value of the business? What is the minimum sale price required and who will receive the proceeds? Are there any retirement payments required for retiring owner/s and what are the terms? If you are in a partnership and you plan to arrange a buyout, what is the value of your share?
• Will there be any key personnel changes?
  If you have employees, you may need to reshuffle key personnel. It’s important to write a clear job description for each position, including the skills, qualifications and training required. You should also list who you expect to be in the position, or if it will be vacant after the reshuffle.
• What registration transfers are required?
  Consider ABN, GST, domain names, intellectual property rights, licenses, permits, subscriptions, memberships and so on.
• What are the legal and tax requirements?
  Documents will need to be drawn up dictating the terms of the succession and contracts may need to be modified or new ones drawn up in the event of the succession. Also consider what taxes are payable in the event of a transfer or sale.
• What are the partnership arrangements?
  Do you have a buy/sell agreement in place? What are the terms? Will the remaining partner/s buy your partnership share or will it be open to external partners or family members?
• What are the insurance implications?
  What insurance policies do you currently hold in the event of disability, death or injury? How will the proceeds be distributed?
• What are the risk factors?
  What are the risks to succession and what contingencies do you need to put in place?

Think of business succession as a process rather than an event and take action now with a view to the longer term. YML Chartered Accountants can help you develop a robust succession plan that will help ensure the long-term success of your business.

 Sources:
https://www.scottishpacific.com/images/pdf-files/2015-Scottish-Pacific-SME-Growth-Index.pdf.pdf