The time has come for us to get into the nitty gritty of Single Touch Payroll (STP) Phase 2.

​What is Single Touch Payroll? 
If you missed the memo, Single Touch Payroll or STP, is a process of electronic data reporting that Australian businesses use to share data with the Tax Office.  
If you have STP-enabled payroll or accounting software, it easily sends the ATO vital reports on things like salaries and wages, pay as you go (PAYG) withholding and superannuation liability.  
The STP process began a few years ago and the reporting items have been expanded for mutually beneficial reasons. Below we’ll discuss some of the critical changes for phase two of STP.  

Does knowing about STP 2 matter to you? 
If you have already engaged Preston Corporate Accounting to process Single Touch Payroll on your behalf, you’re all set. We’ll take care of the Phase 2 process for you. The details below are just for your information. 
For those clients that prepare their payroll themselves, we hope this article is helpful. Please remember that we are here for you as a resource if you need assistance at any time. 
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Phase 2 has already begun 
The purpose of STP’s second phase is to provide the different government departments with more detailed and current information to help improve the delivery of government services.  
The adoption of STP 2 is a compulsory government requirement and came into force on the 1st January 2022. However, users of Xero have until the 31st March 2023 and MYOB had an extension to the 31st December 2022.  
In summary, your accounting or payroll software (Xero, MYOB or QuickBooks) will provide you with the structure needed for the data input. However, you will need to increase your payroll skills to ensure the data you enter is correct. 

So many labels and codes! 
There are now many labels and codes to input for each employee. Understanding these codes is important; it will affect the employees’ government benefits and income tax basis. This includes things like child support and Services Australia entitlements. There are 86 codes to choose from and it is important that you choose the right one for each employee. 
There are quite a lot of labels and codes that need to be correctly selected to properly process payroll under STP 2.  
Here is the list: 

• Allowance types – 10 choices  
• Cessation Type – 7 codes  

• Deductions – 4 types 
• Eligible Termination Payments – 8 types  
• Employment Basis – 7 codes  
• Employment Category – 10 codes  
• Income Stream Types – 10 choices  

• Lump Sum – 6 types  
• Medicare Levy Exemption/Reduction – 2 codes  
• Medicare Surcharge – 3 tiers   
• Paid Leave Types – 6 choices  
• Reportable Fringe Benefits – 2 types  

• Salary Sacrifice – 2 types  
• Study & Training Support Loans – 2 codes  
• Tax Treatment – 9 codes  

These should be integrated into your software, but you may need to follow the STP 2 guides on the ATO website. You can also reach out to us if you need support. 
 
STP 2 implementation checklist 
If we aren't processing your STP, it is important that you approach the implementation of STP 2 in a structured manner and follow a checklist like the one below.

1. Set key milestones in an implementation plan. Set deadlines for each step in the process for your business based on the number of employees you have and your industry. Detail the key steps and when they need to be completed to ensure that you’ll be compliant by the due date. 
2. Keep on top of your payroll software notifications. Make sure you read the updates and the progress of your software provider. 
3. Decide the party responsible for the implementation of STP 2. Right at the start, assign the STP 2 payroll implementation role. Will it be yourself, your bookkeeper or Preston Corporate? Ensure they are aware of their responsibility. Training may be needed to ensure you have the proper resources. 
4. Inform your employees. Many employees will not be familiar with the changes. You may need their input in deciding the correct code to be used.  

Click on your software below for information to help guide you through the process:
Xero
MYOB
Quickbooks

​Where to from here? Don’t panic! Help is at hand.  
Now is the time to get an understanding of, and more detail on STP 2. Don’t wait until the last minute as there may be penalties. Your payroll software will determine the commencement date, so ensure you are on top of their progress. Our bookkeepers will be available to assist you in your setup, so don't hesitate to call us on (08) 9367 4199 if you need to.

Maintaining positive cash flow is essential for any business, big or small. Your business can experience some big problems when dealing with late payments, so it’s important to be proactive to stay on top of your invoicing.  
If you struggle with consistent late payments from your clients, here are some simple actions you can take that can really help.  
Don’t delay your invoices  
Your clients can't pay you if they don’t have your invoice. So be quick to send it to them. Customers are often more prompt in paying when they’ve just received the goods or services from you, so don’t delay. Cash in on that goodwill.  
Provide a detailed invoice 
Your invoice needs to have all the right information included. This includes your business details, their business details, payment instructions, description of the work or product, date of delivery, and any customer requirements like purchase order numbers. You also want to have a clear due date.  
Ask for prompt payment 
Many clients may be used to having weeks to pay invoices, but that’s changing. Over a third of businesses in Australia request payment within a week. It helps set an expectation of prompt payment.  
Make it easy to get paid 
Your clients will typically pay faster if they can use their preferred payment method. Consider offering various options, including cash, bank transfer, credit card or PayPal. You want as few barriers between you and your payment as possible.  
Don’t forget to chase payments 
You’re not done when the invoice is sent. You’ll still need to follow up with the client to ensure the payment has been processed. Have a system that lets you know when an invoice comes past due and give them a call. Don’t let them forget or think that you forgot.  
Withhold delivery until payment 
If you have new clients or clients with a history of late payments, consider switching up the process. Invoice them first, and don’t deliver the final service or product until you've been paid. This prevents the client’s ability to pay late or try to avoid paying completely, and it’s common practice for many businesses and services now.  
Consider direct debit arrangements 
If you have clients whom you work with or service on a regular basis, consider an agreement where you can charge their bank or card from your end. We do this with many of our clients because it makes it easier and faster for both of us.  
It’s important to remember that you provide a valuable service or product to your clients. And that should never be taken for granted. You deserve to be paid efficiently and professionally. 
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And don’t forget, you can always talk to us about your invoicing system and business practices. We can help you streamline things and get you paid faster. ​

What are your business goals for the year ahead?
The beginning of a new calendar year is an excellent time to review the year just finished and reflect on what worked, what didn’t, what you’d like to change and new things you’d like to implement. 
Last year, there were inescapable impacts on businesses, with some thriving, others failing, and others just getting by. So, what kind of year was 2022 for your business? 
Take the time to review the year and acknowledge all that has happened, good, bad or indifferent. Examining the year with an objective perspective can provide valuable insights to prepare for the next business year. Planning and goal setting will help provide a focus for your business efforts. 
Your yearly business review 

• What were the most significant impacts on your business in 2022? How well did you meet the challenges? 
• What worked well last year? What systems, technology, products or services were successful? 

• What accomplishments can you celebrate? 
• What situation, event or experience provided the biggest learning opportunity? 
• What is the biggest challenge or frustration you face as you prepare for 2023? 
• What did you most enjoy during the year? Do more of it. What did you least enjoy? Do less of it! 
• Analyse your financial reports. Are you earning what you’d like to? Is the business sustainably profitable? 

Some considerations to think about

• Interest rates increasing - How will interest rates affect your mortgage? Will you need to increase your salary and put pressure on your business’s cashflow? Do you have an overdraft or loans for the business, how will you fund the increased repayments? Why not sign up to our Profit Improvement Workshop to find the cash in your business to help with funding. 
• Capacity issues - Do you still have a need to add good people to your team? How will you find them? How will you fund it with a tightening cash supply? 
• Cyber attacks - Would your business be at risk? How would you deal with a loss of funds? Do you have a plan in place to reduce your risk?  

Get ready for a great year 
While there are many metrics you could evaluate to track business performance, we’ve given you just a few ideas to inspire your business planning for 2023. 
If you’d like to chat about what you can do differently this year to enable your business to thrive, book a time with us today.

Common tax deductions for small business 
Are you claiming all the business tax deductions that you are entitled to? 
There are many expenses common to most small business, and there are other expenses that are specific to the nature of the goods or services that your business provides. ​​

• Operating expenses include accounting, administration, advertising and marketing, office premises, office running expenses, trading stock, legal fees, insurance and vehicle expenses. 

• Employment expenses include salary and wages, fringe benefits, superannuation and training costs. 
• Other operating expenses may include things specific to your business, for example point of sale systems, freight, professional membership fees, professional education, protective equipment, tools or specialised software. 
• Capital expenses include machinery and equipment, vehicles, furniture and computers. Depreciation for these assets may also be deductible if the expense was not written off immediately. 
• Repairs and maintenance to assets and business premises. 

Expenses must relate to the running of the business and providing the goods or services that your business offers. 

Some common expenses that are not deductible are fines and penalties, provisions for employee leave, donations to entities not registered as deductible gift recipients and entertainment. 
There may be some expenses you want to check with us such as private usage of business vehicles, prepaid expenses, bad debts, loss of stock and borrowing expenses. We’ll make sure to include all the deductions you’re entitled to. 
What’s on the ATO’s radar? 
This year the ATO will be taking a closer look at record keeping, work related expenses, rental property income and deductions and cryptocurrency transactions. 

• Keep records for all business transactions (income and expenses), activity statements and financial reports for at least five years. 

• Keep all records relating to employees, contractors and payroll for at least seven years. 
• If your business is a company, keep all records for at least seven years, including director meeting minutes. 

Other common tax return issues 

• Work-related travel expenses – travel fares, accommodation & meals. The travel should be directly related to income producing activities and you need records to verify the claims. 
• Motor vehicle expenses – keep records for fuel, repairs & servicing, finance arrangements, insurance and registration. Keep a logbook to record private travel. 

• Fringe benefits – have you captured all benefits provided to employees? Vehicle and entertainment benefits are often scrutinised. 
• Superannuation – have you paid the superannuation guarantee on time to employees’ super funds? The payment date is always due on the 28th of the mont following the end of the applicable quarter. The ATO will examine your Single Touch Payroll records including superannuation payments. There are severe penalties for late payment of superannuation. 
• Current temporary tax depreciation incentives - There are currently three temporary tax depreciation incentives available to eligible businesses: 

• Temporary full expensing - for assets you start to hold, and first use (or have installed ready for use) for a taxable purpose, on 6 October 2020 to 30 June 2023. 
• Increased instant asset write-off - if the asset was purchased by 31 December 2020, and first used or installed ready for use before 30 June 2021. The threshold remains at $150,000. 

• Backing business investment - accelerated depreciation for some assets in the 2020 and 2021 financial years. 

Maximise Your Business Deductions 
We can check your business’s eligibility for concessions, offsets, employer incentives and rebates and make sure your business is calculating taxable income correctly, so you don’t pay more tax than you need to! 
It’s important to get the allowable tax deductions right for your business and get in early for your tax return. This way you get more time to plan for payment, or if you are due a refund you will see it in your bank sooner. Talk to us to see what applies for your business. ​

Do you know which business metrics and key performance indicators (KPIs) to implement and track? We can help you set up a custom KPI dashboard to manage the future path of your business, including numerical, financial and non-financial data. Michele Rawlins, part of our team at Preston Corporate, can help you create your own KPI management dashboard.  
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Once you begin trading, you’re faced with the challenge of successfully managing the course of your business and making sure it’s a profitable enterprise. 

It’s easier to manage sales and finances when you have access to the best possible information and data about your performance. Tracking specific metrics and key performance indicators (KPIs) allows you to see how you're performing against your targets – so you can take action to improve performance, sales, growth and profitability. 

But which KPIs should you be tracking? 

Sales and conversion rates 
An obvious metric to track is the number of sales you’re making each month. Hopefully you have set a target for these sales in your business plan, so it’s important to record each sale and see how the business is performing over the current 12 months compared to the last 12 months of trading. 
It’s also important to log and track the drivers that lead to these sales. How many sales enquiries are you receiving? How many of these enquiries are being converted into actual sales? How many customers are being engaged by your marketing campaigns and is this engagement leading to interest in your products and/or services. 
The more detail you can track from your sales and marketing activity, the more forensic you can get with which campaigns are actually delivering the goods. 
Sales revenue and other revenues 
When customers buy your goods, this generates income (or revenue) for the business. Ultimately, no business can succeed unless it’s generating enough revenue to keep the wheels turning, so tracking your sales revenue is a vital measure of your financial health. Tracking your various revenue streams over time keeps you in control of your finances and helps you make the right decisions. You can track performance against your revenue targets and forecast how much working capital you’ll have at a future point in time. This will help you see if there’s enough cash in the bank to fund your current projects and growth plans. 
Cashflow and ongoing cash position 
Good cashflow management is all about balancing the process of cash coming INTO the business and cash going OUT of the business. Recording and tracking your cash position is easy to do with the latest cloud accounting software and cashflow apps, so there’s no excuse for not tracking your cash position. 
Ideally, you want the business to be in a positive cashflow position (with more cash coming in vs. going out). But to achieve this, it’s helpful to see these cash inflows and outflows in real-time. With up-to-date metrics on your cashflow position, you can make informed decisions about spending, payment of bills and where additional cash and funding may be needed. 
Debtor days and aged debt 
When customers fail to pay your invoice on time, that creates an aged debt – money that you SHOULD have received but which the customer has yet to pay. An aged debtor report shows you which invoices are unpaid, which customers haven’t paid, and the total size of this debt. 
Your debtor days number is a metric that shows the average number of days it takes your customers to pay you. Anything above 45 days is bad news, so you want to aim to keep this number between 14 to 30 days, if possible. A large amount of aged debt will leave a hole in your cashflow – and that can quickly start to impact on the day-to-day running of the business. 
Gross profit margin 
Generating a profit is crucial to the continued success of any business and having metrics to measure your profitability is an important part of managing your finances. 
One common way to do this is to track your gross profit margin. This shows the amount of profit made BEFORE you deduct things like overheads. It’s important to show, as a percentage, the cost of goods sold (COGS) so that you can monitor the changes. The formula for calculating your gross profit margin looks like this: 
Gross Profit Margin = Gross Revenue minus COGS, divided by Net Revenue, multiplied by 100 

• Deduct your COGS value from your gross revenue to find your gross profit. 
• Divide this gross profit by your revenue. 
• Multiply the resulting number by 100 to get a percentage. 

This is your gross profit margin as a percentage of gross profit. A percentage of 50% to 70% is healthy but aim for as big a margin as possible. 

By keeping a close eye on these financial metrics and KPIs, you have the best possible insight into the performance of your business – and that’s invaluable as your business journey unfolds. 

If you’re at the early stages of planning out your business idea, please do get in touch with us. We’ll help you set up a custom KPI dashboard to manage the future path of your business and also offer training in Xero accounting software to keep you on the right track. 

Are you making the most of your investment property? Getting the income and allowable tax deductions right can be a confusing task. We’ll help explain the details below so that you’re claiming all you can.  ​

Income to declare 
All income earned from each property must be declared. If you have multiple properties, keep the records for each property separate to make preparation of the tax return more efficient. 

• Rent received – This must be included whether paid directly to you or through an agent/online management platform. Rent includes recurring regular amounts as well as any lump sum amounts paid in advance. 

• Rental bonds returned – for example, if the tenant caused damage or defaulted on rent payment and you received the bond as compensation. 
• Insurance payouts – insurance received for your investment property 
• Expenses reimbursed by the tenant – for example, if they have caused damage and you have paid for the cost of fixing the damages, or if they have reimbursed you for water usage. 
• Extra fees received – for example, letting or booking fees. 
• Government rebates – for example, rebates for installation of solar utilities. 

You will need to keep statements or recipient created tax invoices from agents or management platforms as well as documents for all other payments received. 

Tax deductions 
Deductible expenses are different for residential and commercial properties. Not all expenses related to owning a property are allowable as deductions, so it’s important to check what you can claim. 

Expenses you may be able to claim this year 

• Advertising for tenants 

• Body corporate/strata management fees 
• Council rates 
• Water supply charges 
• Land tax 
• Cleaning, gardening, pest control and property repairs & maintenance 

• Insurance 
• Agent management fees and other charges 
• Some legal expenses 
• Loan interest paid 

Other expenses 
There are some expenses which need to be claimed over a longer period of several years or decades. These can include borrowing expenses, capital expenditure, depreciation, initial repairs and capital works. 
Some expenses cannot be claimed for. These include stamp duty, loans and repayments, some legal expenses and some insurance premiums. 
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Get help to simplify your property records 
Tax matters for property investors can be complex. The ATO keeps a close eye on tax returns that involve property investment, as it’s easy to make mistakes. There are other matters to consider such as the period of rental availability, private use of the property, capital gains tax, legal contracts and positive or negative gearing. This year for many owners there will be insurance claims because of the flooding in Australia.
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We’d love to help ensure you are claiming the right deductions to make the most out of your investment property this year and beyond. Contact us to book a time to discuss your tax return and investment deductions. 

Benefits provided to employees or their associates in addition to salary or wages are known as fringe benefits. These benefits are paid for by the employer from pre-tax earnings, making the provision of benefits attractive to employees as it may reduce their taxable income while receiving payment in other forms. 

However, this isn't all good news as Fringe benefits tax (FBT) may apply based on the type of benefit provided.  Employers can generally claim a tax deduction for the benefits and related tax payable, but at 47% tax, this is not the best outcome for everybody.
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Tax is payable because the benefits are a different form of payment by an employer instead of salary and wages. The tax is calculated on the taxable value of the benefit, which reflects the grossed-up salary the employee would have had to earn to pay for the benefits from post-tax earnings.  

Types of Benefits 
There are many different types of fringe benefits employers may provide to employees. These include: 

• Vehicle owned by the business provided for private use 
• Vehicle lease arrangements 

• Car parking 
• Entertainment, such as golf club membership or tickets to major events 
• Expense payments, such as credit cards or health insurance 
• Other types include debt waiver, loans from the employer at low or no interest, living away from home allowance, or property benefits. 

Some benefits provided to employees don't attract FBT. If you pay for expenses that an employee would otherwise have been able to claim as a work-related tax deduction, FBT won't apply. For example, if you pay for employees to attend a professional development course, there won't be any FBT liability on this benefit. COVID-19 tests required for employment are also exempt from FBT. 

Amounts below $300 (inclusive of GST) spent on employees on an infrequent basis, are not subject to FBT. Tax deductibility may depend on the expense. For example, entertainment expenditure (meals, movie tickets, sporting events, airline tickets) would be non-tax deductible. However, gifts such as hampers, gift vouchers and bottles of alcohol will be tax deductible. 

FBT Administration 
The fringe benefits tax year runs from 1 April to 31 March. You must then include the reportable amount for each employee on their Single Touch Payroll finalisation by 14 July, so it flows through to their annual income statement. 

As with all business transactions, keeping accurate records is essential to determining whether FBT applies and how much needs to be included on the employee's income statement, if any. 

There are two methods to calculating the FBT on benefits: 

1. Actual Method (the default method) is where the employer pays FBT on all taxable meal entertainment provided to employees and their associates (no election is necessary). Entertainment expenditure on customers, contractors or suppliers is not subject to FBT, but is not tax deductible. 

1. The 50:50 method. This is where the employer pays FBT on 50% of all meal entertainment including employees AND contractors, customers, suppliers etc. Regardless of the cost. This method allows 50% as a tax deduction (as FBT is paid) and 50% is nontax-deductible. The employer must make an election to use this method.  

If you're interested in seeing how fringe benefits might apply to your business, talk to us about FBT registration and administration. We can advise on the types of benefits available; how much tax is payable or how to reduce the FBT liability. We'll also get your bookkeeping software set up to make record keeping easy. 

FBT on the Christmas party and gifts    
Christmas is an opportunity for employers to say ‘thank you’ to the team for a job well done, and to celebrate the wins. Unfortunately, Christmas expenditure can attract the interest of the taxman!  
Let’s take the information above and work it into a non-FBT Christmas function example; 
When booking a restaurant, or similar, ensure the cost per employee and their associate (e.g. spouse) is less than $300. You can also give them a non-entertainment gift such as a voucher, hamper or a bottle of wine. The gift must also be less than the $300 and not something you do often, making it an infrequent gift. 

If you have any questions about FBT and how it may affect your business, please don't hesitate to contact us.

On 25 October 2022, the Federal Government handed out its first budget. It was aimed at relieving the cost-of-living pressures, specifically at reducing the inflationary pressures.

Whether you’re refilling the petrol tank or paying at the supermarket checkout, the higher cost of living is hitting every household hard. 

Across the world, everyday essentials are surging in price, up 7.2% year on year across the OECD. Unfortunately, experts predict that prices will keep rising for at least the rest of the year, and into 2023. 

What can you do to try to keep up with the increasing cost of living? 
Here are our 12 top tips:

Look for ways to earn more 

• Grow your business’ profitability (talk to us about improving your profits) or ask for a pay rise. 

• Take in a boarder or flatmate. 
• Sell your unwanted items online. 

Cut back where you can 

• Prepare more meals at home and spend less at cafés and restaurants. 

• Create a budget and keep your spending under control. 
• Reduce the amount of meat you buy. 
• Find ways to use your car less. 
• Pay out and cancel your credit card(s) and any ‘buy now pay later’ accounts. 
• Review your ongoing expenses like utilities, insurance and subscriptions – cancel or switch providers to get better deals. 

Invest in your future 

• Think about investing in ways that are likely to outperform inflation – both shares and the property market have historically provided returns higher than inflation. 
• Start a new business, launch a new product or service, or try a side hustle. 
• Teach yourself about money and finances using free tools online and books from the library. Better money management will help you make the most of what you’ve got. 

If prices rise by 7% this year, it won’t be easy to increase your income by the same amount. But if you can increase your income by 5%, then make up the rest through savings while also investing for the future, you can still come out on top once inflation settles down and prices stabilise. 

Worried about money? Talk to us.
We have years of experience through many economic cycles, including previous periods of high inflation – and we’re always here to help.

A capital gain (or loss) occurs when an asset is sold. The difference between the purchase price and the sale price is the gain or loss. Capital gains tax (CGT) applies to money you have made from selling an eligible asset.

Capital gains tax events occur when an asset is sold, or other triggers arise, such as the loss, theft, or destruction of an asset, or creating contractual or other rights to an asset.

Not all assets are subject to CGT. Common exemptions include the main residence or family home, granny flats, cars and motorcycles, personal use assets such as boats, furniture, household items or loans to family and friends. Many types of lump sum payments are also not subject to CGT, and business sales may also be exempt depending on the circumstances.

Most property is subject to CGT, including land, commercial premises, rental properties, holiday houses and hobby farms. CGT also applies to shares, investments, cryptocurrency, many collectables, foreign currency and intangible assets.

Visit the ATO list of CGT assets and exemptions here.

There are special rules for some specific situations, for example, inheriting assets, relationship breakdown, foreign residents, insurance or compensation payments.