One of the sad truths of people who buy small businesses is that they often don’t get advice until after they have made the purchase. This can lead to too much being paid for a business or it being owned by the wrong legal entity. People selling businesses justify their selling price by the profit produced. When this profit does not include a salary that should have been paid to the owner the purchaser can pay a lot for what in reality is a job rather than a business. If the plan is to own and operate a business and then sell it for a profit a company is the worst structure to use followed closely by a unit trust. …

For many baby boomers the superannuation guarantee contributions made by their employers, although having increased their retirement savings, will have come too late and they will still need to depend heavily on the age pension to survive. The amount of pension they receive will depend on the total value of their assets, excluding the family home, or the amount of income they are earning from investments. Q. I am confused about what income figure should be given to Centrelink. The total income earned in the year or the amount shown on my tax return with deductions, as I have invested some in shares and an investment property. A. Under the income test investments are divided into two categories. For the …

It is common for owners of a small business to use their home for running their business. For some people with a large mortgage it can seem attractive to class it as a place of business and claim a tax deduction for some of the interest on the mortgage. The ability to do this can have a capital gains tax cost. Q. You recently answered a question about someone who was going into business and rented their home. I run a plumbing business from home. We own the property and have a $307,000 mortgage. I built a shed to store my equipment tools etc. Can you tell me what I can claim? A. The first thing that must be established …

The unfortunate truth about Australian politics is that both major parties tend to look after their supporters with the most influence, sometimes to the detriment of others. For the Liberals big business gets preferential treatment, as was evidenced by its Work Choices legislation, while the Labor party supports the unions. The recent super changes introduced by the Labor party are examples of small business owners and the self-employed being disadvantaged and ignored to the benefit of union members. Increasing the superannuation guarantee charge from 9 per cent to 12 per cent, without requiring this increase to be taken into account in future wage case decisions, will increase the operating costs for small businesses already struggling financially. The self-employed, who for …

Over the past 28 years the one constant for superannuation has been change. It has unfortunately too often been viewed by governments as a cash cow that can be milked whenever it needs to balance the budget. The recent changes announced by the Gillard government have continued this tradition. In fact since 1983 the trend has been for the Coalition to mainly increase and improve super benefits while Labor has increased tax on super and reduced benefits. During the Hawke/Keating era the 15 per cent tax on both contributions and the income of a super fund were introduced. This meant Australia was the only country out of a list of 10, including the UK and the USA, which taxed contributions, …

The passing by both houses of parliament of the carbon tax legislation has created a great deal of interest and controversy. By the responses received to last week’s news of the increase in the superannuation guarantee levy to 12 per cent, this move is no less contentious.  Q. Has legislation also been passed to lift the tax rate to 18 per cent on super as well? A. To the best of my knowledge neither party has as a policy to increase the tax on super contributions to 18 per cent. Given Tony Abbott’s opposition to the tax concessions for super, and his preference for the Age pension, it will be interesting to see what superannuation policies the coalition comes out …

When the mining tax legislation was introduced several other tax based pieces of legislation were also introduced. One of these was the changes to small business asset purchase write off amounts from $1000 up to $6500. Q. We recently leased an office to run our small business. After GST has been deducted we spent $4500 on floor boards, $3000 on painting and $2500 of partition materials which we put up ourselves. Can we claim these individually under the $6000 write off tax concession or do we have to capitalise them and write them off as depreciation? A. If the new legislation relating to small business asset write off amounts was already passed by both houses of parliament you may have been able …

Legislation was introduced into federal parliament this week to increase compulsory employer super guarantee contributions from 9 per cent to 12 per cent. This will be done in small increments over the next seven years if the legislation passes both houses of parliament. As part of the legislation the current age limit of 75 for making super contributions would be removed. Q. In the event that an employer fails to comply with the super guarantee rules and a penalty is applied, where does the extra money go? A. The administration charge of $20 per employee, when an employer does not meet their superannuation guarantee responsibilities, is a fee retained by the Australia taxation office. The interest charge that forms a …

Owners have to put up with many things that can affect their business. Some things they have control over, such as the quality of the good or service they provide, but there are others that they have no control over such as government policy. Unfortunately, depending which side of politics is in power, the policies can be beneficial or detrimental. Often the changes in government policy can swing from one extreme to the other. Examples of this are the regulations that relate to unfair dismissal claims for small business owners. Prior to the changes made by the Howard Liberal government small businesses often found it more cost effective to pay out a spurious claim for unfair dismissal, rather than get …