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. …

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 …

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 …

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 …

Applying for an ABN and running a business does not change the way a person is treated for income tax purposes. All of the rules that apply to an employee are the same for someone running a business.  Q. I am a UK citizen on a working holiday visa. I have an ABN number as I have been doing a spot of freelance writing here and there. I earn very little through writing, say $65- $100 every 2 weeks. As I am a UK citizen and I will be claiming my tax back through my TFN do I need to be taxing myself through my ABN number, even though it is very small amounts of money?  A. There is no …

When a business is registered for GST it can claim the GST input tax included in the cost of business expenses and assets purchased. The amount claimable is based on the business use of the item purchased. Where an expense or an asset has a private usage component only the business usage percentage can be claimed. Q. I just brought a car in a private sale that’s over 10 years old. I have my own company and this is the car I use for the business. I work from home and the car is registered in my own name. Can a claim this $6000 purchase as a company expense in my BAS? Is there any paper work I need to …

In this two speed economy there are many small businesses doing it tough. The federal government is also finding its financial situation hard going. When small businesses have cash flow problems their survival tactic is to slow down payments. When the government is in a similar position they increase tax collections. Increasing cash flow by increasing taxes does not work when an economy is on the brink of an economic downturn. The alternative for the government is to have the Australian Taxation Office delay paying refunds, under the pretext of increased audit activity, and to pursue taxpayers with more vigour that have outstanding tax debts. In the past the job of collecting outstanding taxes has been done in most cases …

Owners of small businesses can often feel alone with no one to support them. This was the case in Victoria until 2003 when a Small Business Commissioner was appointed. The good news for small business owners in the rest of Australia is that other states are now considering creating the same position. The roles and duties of the Victorian Small Business Commissioner predominantly flowed from the need to protect small business tenants from unfair practices of large corporate landlords. The primary responsibilities of the Small Business Commissioner are: to facilitate and encourage the fair treatment of small businesses in their commercial dealings with other businesses in the marketplace; to promote informed decision-making by small businesses in order to minimise disputes …