March 2011 Newsletter

• Home based business? - What are the tax implications if you run your business from home
  
  
• Bookkeepers Survey by ICB - 817 bookkeepers tell the real story 
  
  
• Stepping out in 2011 - Feedback says it has hit the spot
  
  
• Foundations of a Good Budget - Brought to you by Calxa
  
  

The PDF version of this newsletter is available here

In this month Members newsletter you will find the following additional articles:

Important News for You

• ABS Statistics on business entry and exits for 2009

Best Practice Bookkeeping

• GST Hotspots
  
• Clarifying Paid Parental Leave - your questions answered
  
• Agents billing for artisit & disbursements in the GST world

Do you keep a diary ?

No, we won’t read it but the ATO might like to.

As bookkeepers we help our clients keep good records. So sometimes we need to treat ourselves as a client and look at our business dispassionately, check we are keeping our own records well. A Diary can be a great resource for our business, it keeps our clients details, our appointments and if we have a home based business then it can track our business usage pattern and gives us vital records for claiming expenses.

When we start in business we often work from home, there are many valid reasons including financial and personal for that choice. As in all business decisions we make, it is valid to review them often as our business grows and changes. Does working from home still gives us the best financial opportunity & flexibility for our business? Does our current business structure still suit our business? What are the Tax implications for our home being our ‘Principal Place of Business’?

HOME-BASED BUSINESS

So we must first examine what is a ‘home based business’.

1. A home-based business is where you operate the business mostly from home, generating your income from activities completed there. A portion of the home is clearly identifiable as a ‘place of business’ and is used almost exclusively for carrying on a business and includes clients visiting.
2. You don’t have any other office other than your home e.g. a bookkeeper, without any office, who only works at client’s premises.

Generally you can claim similar expenses to any other business. However there are specific expenses associated with carrying on a ’home based business’.

Expenses covering the area of your home defined ‘for business’ and motor vehicle expenses from your home to business locations.

Expenses relating to the Home Business Area are broken up into two broad categories: Occupancy & Running Expenses

OCCUPANCY expenses relating to ownership or use of a home, these include: rates, rent, mortgage interest, insurance. Before you are entitled to claim occupancy expenses there is an ‘Interest Deductibility Test’ you need to review: A portion of the home is clearly identifiable as a ‘place of business’ and is used almost exclusively for carrying on a business and includes clients visiting & is generally unsuitable for a domestic purpose. Satisfying this test also has another issue attached to it – Capital Gains – when selling your home CGT will become an issue for you – even if you have not previously claimed interest on your mortgage as an expense. This is an issue you need to talk to your accountant about – don’t wait till you want to sell your house!

RUNNING expenses are the increased costs relating to the use of facilities within the home. If you are eligible to claim running expenses only, you will not incur CGT if you sell your home. Running Expenses include: electricity for heating/cooling, business phone, cleaning cost, depreciation, leasing charges & cost of repairs on items of furniture and furnishing Running Expenses can be claimed:  

CAPITAL GAINS TAX (CGT)

So now we come to the questions of Capital Gains Tax. Please consider the following in making your assessment and obtaining specific advice:

CGT does not apply if:

• You operate your business from a rented home
• You bought your home before 10 Sept 1985
• You do not have an area specifically set aside for your business activities’

CGT may apply if:

• You bought your home on or after 20 sept 1985
• You used part of your home to produce business income at some time while you owned it
• You were entitled to claim a deduction for interest you paid on your mortgage

CGT may apply even if any of the following applies:

• You do not claim deductions for occupancy or running costs
• You have never claimed a deduction for interest
• You owned your home outright before you started using any part to produce an income
• You started a business from home but have not yet made a profit.

You may want to record milestones in your diary so you and your tax adviser can establish a clear or notional start date for your business.

As we advise our clients – remember to take your own advice and keep good records for your business. Discuss your plans with your accountant, regularly.

‘A Guide for a Home Based Business’ ATO document NAT10709-07.2010 has great information and examples; I strongly recommend you get this document. (Click here for your copy)

Tax basics for small business NAT 1908 –08.2010 

• Audit cases involving client contact 750,000 (5X year to June 2010)
• 98.5% GST registrations processed within 28 days
• 184k GST registrations cancelled
• 2,690,288 active GST registrations
• 5,079,559 Activity Statements lodged
• $22.8b GST collected to Dec.
• $253.2m costs to admin to Nov

GST Debt stats 30/11/10 

• Total GST debt $4,658b Collectable $3,262b
• Firm action: Garnishee & Stat demands if taxpayers are unwilling to engage or default on arrangements.
• GIC free arrangements
  • Direct debit or ongoing viability proof
  • $1.2b in GIC free arrangements
• Strong emphasis on pay in full or direct debit payment arrangements
• Business viability assessment by the ato
• 79k activity statement debts to external agencies in 5 months
• 220k conversations on debt

ATO getting SME to comply 

• Strong focus on helping business to comply
• Promoting voluntary compliance

Compliance strike rate 

• 61%
• Integrity of business systems
• Activity statement lodgement
• Refund exploitation
• Refund integrity
• Property transactions
• Out of scope supplies

Activity Statement lodgement (31 December, 6 months)

• 76.32% monthly on time of 84.15%
• 74.43 quarterly on time of 79.24%

Court & GST 

• 18 GST fraud cases
• All successful to ATO with convictions
• 14 prison sentences
• $12.6m GST to be repaid
• 425 less serious convictions (fail to lodge)

Cash economy program - An ATO success story

• 2149 visits
• $2m of GST raised

Having participated in the recent ICB National Road show conferences, I would like to personally thank those of you that stopped by to meet and chat at our trade display.

It became very apparent that there is still some mystique around "what is professional indemnity insurance” and “what does it cover".

Without delving into all the various sections of professional indemnity insurance, it is worth sharing that your Professional Indemnity Insurance is essentially there to cover you for any negligent act, error or omission. The ICB endorsed policy underwritten by Chubb Insurance and only available through Insurance Made Easy has been specifically designed in conjunction with ICB management to ensure a broad, tailor made coverage.

Should you be comparing the ICB policy against another insurer’s policy, some of the questions to consider asking of the non ICB policy are as per the following:

• does it have defense costs on top of the insured limit?
• does it CLEARLY define the recognized duties of a bookkeeper?
• does it CLEARLY define BAS as a registered BAS agent or could it still be stuck under the old wording "BAS services under the guidance of an Accountant"?
• does it CLEARLY set out supply, installation, setup, and training on accounting software?
• does it include three years free run offer cover?
• does it cover advancement of defense costs?
• does it include official investigations such as those carried out by the ATO, and/or The Tax practitioners board.

One question that was asked quite often during the conference -

Question: I am student member or I am currently studying for Cert 4, can I take out insurance?

Answer: Yes, of course you can and we would highly recommend that you do if you are already providing bookkeeping services to clients.

You should have professional indemnity insurance in place.

We are here to provide you with guidance:- whether you are a new bookkeeper or a seasoned experienced practitioner, please feel free to contact us for a friendly chat to clear up any misconceptions about what you may have around Professional Indemnity Insurance.

Contact: Sam, Helga or Adriana on 1800 64 1260

 Does the above article make sense? Do you have any questions as a result of the above? Link to the ICB Forum thread on this article and post your reaction.

Foundations of a good budget report (brought to you by Calxa)    

I want to share my thoughts on what is required to prepare good budget reports. It’s no good presenting reports to your board, manager or your bank that contain errors. This checklist should help ensure that you produce good, reliable, board-ready reports.

1. Reconcile your bank account(s)
2. Review debtors and creditors
3. Review allocation journals
4. Review clearing accounts
5. Review Salary Sacrifice accounts
6. Check Job Exception Reports
7. Review budget variance
8. Review unspent budgets
9. Run Cashflow Forecast

Completing these checks at the end of each month will give you greater confidence in the reports you produce. Budget reports are an important management tool for any organisation, whether it’s a small business or a not-for-profit. 

Here are some tips that you can consider to improve your invoicing:

Ten Tips for Setting up a pro forma invoice

The standard details on your invoice can ensure that the customer has all the information that they need to pay the invoice. These details should include:

1. Business name and if relevant trading name
   
2. The Australian Business Number (ABN) or Australian Company Name (ACN)
   
3. If registered for Goods and Services Tax (GST), then the invoice must state that it is a “Tax Invoice” and the GST amount for each charge shown separately
   
4. Business contact details: include all contact details, such as postal address, email address, website address, contact telephone and facsimile numbers
   
5. Invoice date: this will be the date that you raise and send the invoice. This is particularly important if your invoice has payment terms such as “30 days from invoice date”
   
6. Invoice number: useful when following up unpaid invoices as a reference
   
7. Customer details: include the mailing address and email address if sending by email. Address the invoice to the person that you have agreed to provide the goods or service to, as it is most likely that they will have to approve the receipt of the goods or services before payment is made. Include customer telephone number for easy reference if you need to follow up on the payment
   
8. Description and payment amount due. This should be in the main body of the invoice and provide as much detail as is required to identify the products or services provided. This section may also have an area to include customer references such as their purchase order number or contract agreement dates etc.
   
9. Payment Terms: this will be the terms of payment that you have agreed with the customer. To ensure no confusion, it is recommended that you convert the payment terms to a specific date that the payment is due. For example, if the terms are 14 days from date of invoice and the invoice is sent on 1st of May, then include the payment date on the invoice as “Payment Due Date: 15th May”
   
10. Details for payment: this should include all alternatives available to the customer to pay. The more options you provide for payment, the less excuse they will have not to pay. For example, provide direct banking details (ask for a reference to be included on the details of the BPay or direct credit such as invoice number to make it easy to identify where the payment has come from) which should include the BSB number of your bank, your account number, the account name and the name and branch of the bank. Other payment options could include credit card payments or EFTPOS payments

This article is written by Jan Barned, owner of Financial Management Trainer, a business passionate about training small business owners to Take Financial Control of their business. Jan is the author of the Small Business Victoria publication and seminars on “Achieving Financial Success”

  Do you have a question or a comment? Click here

•  1,306 standard BAS applications
• 15,248 BAS notifications
•  1,290 BAS transitional applications

This is a total of 17,844 BAS applications

Of these, the TPB is still processing 936 applications.

Upcoming Meetings:

Actions for you to think about over the next few weeks

What is Linkedin?

In very simple terms Linkedin is an online resume, though scratch a bit deeper and it is a platform for demonstrating expertise, connecting with an online network and a source of raw possibilities. As of Jan 2011 Linkedin reports more than 90 million registered users. As a bookkeeper, Linkedin needs to be a part of your digital real estate and your online social presence.

What do you need to establish your Linkedin profile?

You can visit www.linkedin.com and create your own profile. All you need to start is a resume and an email address.

What should you have on your profile?

There is a plethora of opportunities to highlight expertise and focus on interests on Linkedin. The Linkedin profile has a standard framework around which information can be added. There is a limited field to provide details of current positions, past positions, education, recommendations, connections, and websites. There is an extensive field for a summary of your career profile. You are in full control of what is displayed on the profile. When your name is searched on Google, your Linkedin profile will appear high on the search results. Should I mention again, you are in full control of your profile? Linkedin has received negative criticism about the ability to present a rose coloured profile. However, I know people who have told outrageous lies on their paper resume, so while it may be a bit self promotional, by being in the public domain, maybe the credentials are being somewhat validated?

• That critical first impression your people make on the customer
  
• Your employees’ ability to fulfil their needs & wants
  
• The distinctiveness of your employees’ ability to deliver customer service

Yes, your customers are going to judge your business by three things… your employees, your employees and your employees.

That’s why it’s critical to ensure that the standards by which the customer judges your staff are tip top.

• Appearance
  
• Method of greeting
  
• Facial expressions
  
• Body language
  
• Knowledge of the product or service
  
• What they say and how they say it
  
• How well they listen
  
• Sincerity and enthusiasm

Put yourself in the shoes of the customer and go for a stroll around the business premises, how would you judge them on these issues?

Did you know that ICB Member's have access to.............

	Practical, useable, everyday resources — www.icb.org.au/ICB_Resources
	A 'home page' just for bookkeepers - www.icb.org.au/home_page
	Bookkeepers phone or email support — admin@icb.org.au / 1300 85 61 81
	Bookkeepers directory to promote your business — www.icb.org.au/directory/search.aspx
	A Forum for bookkeepers by bookkeepers — www.icb.org.au/forum
	PI Insurance specifically designed for bookkeepers —www.icb.org.au/Insurance_Details
	Members ONLY newsletters with bookkeeper relevant news — www.icb.org.au/Members_Area
	Professional email address — your.name@micb.com.au
	Network Meetings for bookkeepers — www.icb.org.au/Network_Meetings
	Notification of jobs in your area—keep your email address up to date!!
	THE BEST website for bookkeeper information — www.icb.org.au
	Use of the ICB Crest on your stationery — www.icb.org.au/Resources/ICB_Crest
	Notification of urgent, relevant updates — www.icb.org.au/ICB_Homepage
	Discount on Bookkeeping Dummies — www.icb.org.au/Shop
	Discount on MYOB and Reckon software — www.icb.org.au/Shop

Would you like more details? Call us on 1300 85 61 81 or drop us an email - admin@icb.org.au

It is great to see the forum really starting to be used, and with over 4850 topic views in the first 6 weeks, well the sky is the limit.

We have been receiving some great feedback regarding the Stepping out in 2011 conferences - have a look here

Feel free to start any new conversation threads and if you have any questions or queries you are welcome to list them on the forum also, remember this forum is for bookkeepers by bookkeepers!!

The Latest Updates lists all the topics in order of the replies.

You can click here to view all the current topics,

Commissioner's address to the Tax Institute of Australia National Conference, Brisbane, 3 March 2011.

http://www.ato.gov.au/distributor.asp?doc=/content/Content/00272051.htm

Published: 15 Mar 2011

You can claim deductions for costs incurred in running your business, provided the expenses are not of a private or domestic nature.

http://www.ato.gov.au/distributor.asp?doc=/content/Content/00266008.htm

Published: 16 Mar 2011

• Levels of protection for indirect tax advice and guidance
• Have any of your clients made a mistake with their GST?
• Third party adjustments - further changes
• Be prepared to complete your client's activity statement
• February webcast now available
• Payment of employee super fees and insurance premiums
• Targeting tax crime e-magazine - issue 4 out now
• What's new?

Click here to read the full newsletter

• Free superannuation clearing house for small business
• Reminder – super payments for quarter three due soon
• Paying super for contractors Make sure your temporary resident employees depart with their super
• Taking a balanced approach to debt collection Lost super can work for your retirement
• Is your identity secure?
• Targeting Tax Crime e-magazine – issue 4 out now

Click here to read the full newsletter

http://www.ato.gov.au/distributor.asp?doc=/content/Content/00271328.htm

Published: 03 Mar 2011 

A recent court case has highlighted the importance of being sure that an activity that you might think is a hobby, actually is.

http://www.ato.gov.au/distributor.asp?doc=/content/Content/00263363.htm

• Apply for ICB Membership here
• Renew your ICB Membership here
• BAS Agent updates and information

MYOB           Xero                ICB Global            Cengage MYOB has sponsored the ICB Network meetings as a direct support of the need for members of the ICB and other bookkeepers to get together for development and networking.

XERO has come on board as a direct support of the production of quality information and enhanced communication within the bookkeeping community.

ICB Global continues to support ICB Australia through the provision of web resources, database infrastructure, bookkeeping resources, information and IT support.

Cengage Education supports ICB in the dissemination of quality information about the education environment including information of Cert IV providers and total education programs.

MYOB has engaged ICB to provide the assessment knowledge and expertise behind the MYOB Approved Bookkeeper program

Please note that, in between newsletter issues, articles may be published straight to the Latest News section of the website.   Please check the headlines which can be found in the top right of the website homepage, to ensure you stay up-to-date.

The Institute of Certified Bookkeepers complies with the Spam Act 2003 and we have a documented Spam Policy on our website

ICB's Newsletter contains news articles, links and regular sections that we feel will be of interest. If there is anything that you would like to see, whether a regular feature or a one-off, please let us know. Email your ideas to admin@icb.org.au