Tag Archive: BAS

Record Keeping for Your Business – What You Need & How To Make It Work

Posted on October 12, 2019
by Anthony Vardareff

4 min read

Are you either in the process of setting up your business and not sure where to start with records and financial reports, or are already running your business and realised that your current record keeping process isn’t working for you? If you are in either of the above situations this is the article for you.

Record keeping is probably one of the less-exciting, but very necessary parts of business. The enjoyable aspects of setting up your business name, structure, space and team are great to tackle but without an efficient and effective process in place to manage and review your cashflow, profits and losses, salaries, tax obligations and more, you could fall behind very quickly and things could get costly.

We’ll take you through the why, what and how of record keeping which is basically – why it’s important, what it involves and how to make it work efficiently and effectively.

Record Keeping Benefits

You probably already realise the benefits of record keeping to be reading this article about it now. In case there are reasons you haven’t yet thought of we’ve listed them below:

  • Helps efficiency within your business
  • Assists in forming the basis for managing your cashflow
  • Provides timely access to information and records
  • Allows you to track business health to make important business decisions
  • Tracks key performance measures
  • Ensures information is readily available for monthly and annual reporting

Top Three Record Keeping Uses

Annual reporting obligations

  • Income Tax Compliance – As a business you need to prepare and lodge annual tax returns to the Australian Taxation Office (ATO). These will contain your income and expenses for each financial year (which is something your accountant/business advisor can assist with).
  • Payroll Reporting Requirements – This involves being compliant with the new Single Touch Payroll (STP) requirements. The ATO has introduced an STP reporting requirement for employers where they need to submit payroll information to the ATO on a real time basis (i.e. at the point of finalising each ‘pay-run’).

Monthly and quarterly obligations

  • Business Activity Statement (BAS) / Instalment Activity Statement (IAS) – This is the declaration of GST, PAYG Withholding, PAYG Income Tax Instalments etc. on a monthly or quarterly basis as required by the ATO.
  • Superannuation – Businesses are required to report and pay employee superannuation amounts within 28 days of the end of the quarter. There are strict guidelines enforced by the ATO so that employees are looked after and paid their superannuation on time and in full.

Internal reporting considerations

  • Cash Flow – Up-to-date records provide business owners with a full overview of their current cash position, as well as expenses due to be paid and income expected to be received. This can assist in planning to ensure enough cash is always available to run your business.
  • Profit & Loss – The ability to generate a correct, up-to-date Profit & Loss report will allow business owners to identify how much income they’ve earned over a certain period, in addition to providing details of the expenses they’ve incurred in order to earn this income. A Profit & Loss report will help in determining when a business owner can reduce costs and improve their overall business performance.
  • Budgeting & Forecasting – Good record keeping through the use of an accounting system can aid in projecting/estimating upcoming income and expenses, expected cash flows and the overall performance of your business.
  • Customised Reporting – Ad-hoc reports (eg. sales by customer, aged receivables, aged payables) can provide timely access to important business information. These reports can form the basis of the ongoing decision-making process for business owners. For instance, a ‘sales by customer’ report will assist in working out who the largest customers of a business are – ultimately allowing business owners to better tailor their products or services to them.

Record Keeping Requirements

As you know there are records that you are required to keep, and report on, as the responsible business owner. The ATO is a significant government body that uses these records to ensure that businesses are doing the right thing and meeting their reporting obligations. Fortunately with the introduction of online services, reporting to the ATO is much more efficient and easy. As a business owner you are required to:

  • Keep records for a minimum of 5 years
  • Make the records easily accessible and in English
  • Lodge monthly and annual reports as required by the ATO

If you are a small business owner you can find more information on record keeping here.

Accounting Software Suitable for Your Business

To make your record keeping and reporting as efficient and easy as possible, it’s important to have the right systems in place. Setting up cloud accounting software is a popular step in the right direction as it can be accessed anywhere, allows you to set up automatic bank feeds for better efficiency and accuracy and makes it easier to meet certain reporting obligations.

We’ve listed the most common and trusted accounting software platforms below, along with a brief description of what makes them different and a link to their website so you can work out which type might suit your business best:

  • Xero – A more robust and adaptable system but generally costs more than other packages (small-to medium businesses)
  • Quickbooks – Is a more basic but cost-effective option (small businesses)
  • MYOB – Offers a little more functionality than Quickbooks but is also slightly more expensive (established businesses)
  • Reckon – Similar to MYOB (established businesses)

For some industries it’s beneficial to have software specific to your industry and requirements. In this case we recommend you speak to your accountant or business adviser to discuss the options available.

Ongoing Records Management

If you are new to business and don’t have a team of employees on board to help, it may be beneficial to hire a bookkeeper for your record management and to ensure reporting dates are met. Record keeping still takes time and as a business owner you have a host of other tasks that require your attention.

In a general sense, bookkeepers may charge around $40 – $50 an hour. With ongoing technological efficiencies being built into the various cloud accounting software packages, a lot of processing can now be automated. The time it now takes to ‘reconcile’ an accounting file has reduced significantly over the past few years. An hour or two each fortnight may be all it takes to keep your accounting records up-to-date.

Common Mistakes To Avoid

When looking at record keeping, there are usually two common mistakes made by business owners:

  • Misreporting – Providing inaccurate information to business stakeholders, such as employees, the ATO and customers/suppliers. Having a strong record keeping function (i.e. using the services of a bookkeeper or taking the time to learn how to use your accounting software) will help minimise the risk of misreporting.
  • Late lodgement – The late preparation & lodgement of information for annual, quarterly and monthly obligations is another ever occurring issue in business. Much like misreporting, having a strong record keeping function will assist in keeping up with deadlines and other requirements.

In some instances, there are repercussions for misreporting information or lodging information late. These can come in the form of general interest charges, administration fees, penalties and sometime more severe consequences. It is therefore crucial to ensure your business is engaging in good record keeping practices.

Putting It All Together

Getting control of your records is a great way of getting in tune with your business situation. It allows you to set goals and identify other areas that you would like to focus on.

But there is also no one size fits all approach to any business and that also applies to record keeping. You need to use your knowledge to work out what processes and solutions work best for you and this article is a great place to start.

If you find that you do want to engage a business adviser to go through your options or gain some guidance, make sure they align with your values, they listen to what YOU want to achieve and they offer sound solutions that make sense and that make you feel confident in their ability. We ensure you will find it useful to get in touch with our team for a chat so you can find out if our approach suits your business.

Wishing you and your business every success!

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Withholding GST for Residential Property Transactions

Posted on November 26, 2018
by Adam Birrer

The current financial year has seen a change introduced to the GST rules that will have significant ramifications for property developers (suppliers), and to a lesser extent, their customers (purchasers).

For contracts entered into after 1 July 2018, purchasers of new residential premises or potential residential land are required to withhold an amount of the contract price and pay this directly to the ATO as part of the settlement process on sale.

This was introduced as an integrity measure, to target developers who in some cases were failing to remit the GST collected on their property sales to the ATO. It is not intended to apply in the case of a sale of existing (not new) residential property, which is not generally a taxable supply for GST purposes.

There are also exclusions from the requirement to withhold in respect to supplies of new commercial residential premises (e.g. hotels), existing premises that are deemed to be new by way of substantial renovation, land currently in use for commercial purposes, or where the land is being acquired by a GST registered entity for a creditable purpose (e.g. by another developer).

It is important to note that the rules that determine whether the sale of a property is a taxable supply have not changed, nor has the fact that GST on the sale is ultimately the supplier’s liability. It is still up to the supplier to determine the appropriate GST treatment of a property sale – it is only the mechanism & timing for payment to the ATO that has changed.

So, how does it work in practice?

Supplier Notification

The supplier of the property is required to notify the purchaser in writing of their obligation to withhold and provide information including the ABN & details of the supplier, the amount that must be paid to the ATO and the date this must be paid.

In practice in NSW, the standard Law Society / REINSW ‘Contract for the Sale and Purchase of Land’ has been updated to include a tick box to indicate if an RW payment is required, and if so, capture the necessary information that is required to be notified to the purchaser by the supplier.

The withholding amount will generally either be

  • 1/11th of the contract price (for fully taxable supplies); or
  • 7% of the contract price (where the supplier is using the margin scheme).

Note: Penalties apply if a purchaser fails to withhold, however there are protections for purchasers where they rely on the information in the notice provided by the vendor (and it was reasonable to do so in the circumstances).

Purchaser Online Forms & Payment of GST Withholding at Settlement

There are two online ATO forms that need to be completed by the purchaser over the course of the transaction.

The first form (‘GST property settlement withholding notification’) needs to be lodged after the contract has been exchanged, but before the due date for payment of the withholding amount, and is used to notify the ATO of the details of the property, the purchaser and the supplier. This will generate a Payment Reference Number & Lodgement Reference Number which will need to be used with the second form (details below).

The second form (‘GST property settlement date confirmation’) needs to be lodged on or before the date of settlement to confirm that settlement has occurred. It is at this point that the purchaser needs to pay the withheld amount directly to the ATO, or give the supplier a bank cheque made out to the ATO. The purchaser & supplier will both receive confirmation once the payment has been processed by the ATO.

Supplier Business Activity Statement

The supplier is still required to lodge their Business Activity Statement (BAS) and report their GST liability on the sale as before.

When the supplier lodges their BAS for the relevant quarter in which the sale occurred, they will be able to claim a credit for the amount remitted to the ATO by the purchaser against the GST liability on the sale.

In the case of sales using the margin scheme, this may give rise to an additional amount payable, or a refund, depending on whether the actual GST liability was greater than or less than the 7% withheld.

What does this mean for developers?

Property developers will need to ensure they revise their project cash-flow forecasts and planning to account for the fact they will not receive the GST component of the sale price at settlement.

As an example, let’s say a developer makes a $1.1M fully taxable property sale for a new home in a residential subdivision which settles on 1 October.

Previously, if the developer was registered on a quarterly basis they may not have had to remit the resulting GST liability on the sale until 28th February when the relevant BAS fell due, so they would have had the benefit of retaining the $100k GST component received on settlement for use in their general working capital for up to 5 months.

This money could have been used by the developer to assist in completing their project, in paying suppliers and employees etc, before the business needed to meet the GST liability by the required due date (which could have been done out of the proceeds of later sales for instance).

Under the new rules, the developer would only receive $1M at settlement with the remaining $100k being paid directly to the ATO – meaning this money is not available to the business in the meantime. The developer would need to ensure they have funding available from other sources to assist in completing the project if required.

The above is of course only a general overview as every situation is different. If you are a property developer or purchaser our team at BLG Business Advisers can provide you with clarity on your situation.  Take this opportunity to get in touch online or by calling (02) 4229 2211 to discuss your circumstances today.

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