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Why my income is dropping.

We went to see a client today to sort out his messy books about 3 years behind. He is around 29 years old and he is a builder, have a nice beautiful house just almost get out of terrible divorce. All was good but after we have almost sorted out his documents he asked me “Why my income is dropping”. I stopped a little while and started preaching. I said because you are not selling, you have no selling skills, selling = income, no sell= no income. He asked how do I know he is not selling. I asked him do you have a website, he said no, I asked do you do advertisement, he said no, do you have business cards, he gave me one with old company name, I asked where you get your clients from, he said most from referrals really. I told him referrals are good and in most cases very effective but you need to have a sizable customers before you get regular referrals, no wonder your income is dropping, he was speechless…

Let we go, I have done too many bookkeeping and accounting staff, now I really think I should teach people how to sell, because this is more important for most of business than tax bills, remember this Sells = to income, no sell = no income. More sale = more income.

Until next time,

Accounting & Bookkeeping Group Australia Pty Ltd (0403595274)

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Now you’ve found the right investments, it’s time to consider the right investment vehicle. There are four possible investment structures, each with its pros and cons, especially when it comes to taxation:

■ buy the investments in your own name, in your partner’s name, or both;

■ invest via a self-managed superannuation fund;

■ use a company structure; or

■ set up a family trust.

Generally, it pays to invest in the name of the person with the lowest rate of personal income tax, but capital gains tax considerations can also come into play.

Minimisation good, evasion bad

Tax minimisation – as opposed to tax evasion – is a perfectly legitimate goal when structuring your financial affairs. Income splitting, timing investment transactions and negative gearing are just some of the ways you can limit the eroding effects of tax.

However, tax law is complex and ever changing, so it’s an area where specialist, individual advice is crucial.

And you should never let tax considerations overwhelm your investment decisions. A bad investment is still a bad investment even if, on the face of it, it’s a tax-effective one. There’s no glory in saving tax when you’re losing money on the investment itself.

Income splitting

While some forms of income splitting are prohibited, when it comes to investments households can make decisions about whose name assets should be held in to achieve the best tax result.

Assets could be held jointly, so each party’s tax-free threshold comes into play when the income from those assets is taxed. Or the assets could be in the name of the person on the lower personal income tax rate.

Capital gains tax

A capital gain or capital loss is the difference between the proceeds when you sell an asset and its original purchase price.

Capital gains tax applies to assets bought since September 19, 1985 (when the tax was introduced). It’s applied at your marginal tax rate – in other words, the top tax bracket into which you fall.

But there are two ways you can minimise the amount of CGT you pay. First, hold an asset for more than 12 months and you’ll pay CGT on only half the capital gain. Second, because the tax is applied to your net capital gains you can time asset sales so your capital losses partly or wholly offset your capital gains.

Negative gearing

Negative gearing occurs when the interest you pay on your borrowing for an investment – usually property – is greater than the income from that investment. On the face of it, that’s not a great result. But you can use this shortfall to reduce your taxable income and therefore the amount of tax you pay.

Again, don’t let the tax benefit blind you to all other considerations. You may get a tax break but you still have to be able to meet interest payments on your investment loan.

Apart from the tax break, people negatively gear because they’re more interested in the potential capital gain on a property than the rental income in the meantime. But another risk is that the value of the property will fall.


Of course, another effective way of accumulating wealth is super, which qualifies for attractive tax breaks.

Investment earnings in super funds are taxed at the concessional rate of 15 per cent. That’s likely to be much less than the marginal tax rate you’re paying on other investment earnings – up to 47 per cent if you’re in the top tax bracket.

And there are ways to maximise your super savings.

On the down side, super is heavily regulated, the rules tend to change, and your money is tied up until retirement age. Younger investors may want to keep some of their money in more liquid assets that are more easily accessed.

Looking at a company’s annual reports will tell you a lot about the business. Essentially, what you want is a business with little or no debt that is generating high returns on equity. Keep that in mind as we take a tour through the three statements that form the core of a company’s financial reporting.

The balance sheet

Rule No.1 in investing is: don’t lose your capital. The balance sheet is where you can start to get a feel for whether a company is destined for failure. When things turn sour a heavily indebted company can quickly find that it’s unable to meet its obligations.

A common way to measure the “gearing” of a business is by dividing total debt (say, net of cash) by the total value of the assets (or sometimes the equity) on the balance sheet.

How much debt a company can manage depends on how reliable its earnings are, but for your standard, industrial-type company a ratio of less than 50 per cent debt to total assets is a good starting point.

You can also judge a company’s ability to meet its obligations by turning to the income statement to measure its “interest cover”, which is operating earnings before interest and tax divided by the total interest payments. A cover of four times is solid.

Rising debt could mean the company can’t generate enough cash to fund itself – not a good sign. Similarly, falling debt could mean the opposite.

Income statement

This is where you’ll find the company’s profit. However, be aware that tax rates, writeoffs, acquisitions, one-off sales and cost-cutting can serve to obscure the true, underlying performance of the business.

This is why many analysts prefer to look at the statement of cash flow, which is harder to manipulate.

Nevertheless, tracking the trajectory of operating revenue – “top-line” growth – will give you a good feel as to whether the business is expanding.

Of course, the company could just be raising more and more shareholder equity to fund that growth, which is bad news from an investor’s point of view.

That makes return on equity (ROE) a crucial figure. It’s calculated as the earnings per share (before “extraordinary” or one-off items) divided by the total number of shares outstanding.

All these figures should be disclosed by the company. An ROE above 15 is very good, and one above 20 is excellent.

Cash flow statement

Cash flow is the lifeblood of a business. A business with no profit can live to fight another day; one with no cash flow cannot.

Companies can generate cash from their daily business operations, by selling large fixed assets or by borrowing or raising capital.

Obviously what you want is a company that’s generating a lot of cash through the course of its normal operations, and at a rate above what it needs just to operate.

That leaves it with enough cash to be able to distribute some to investors via dividends or share buybacks, or to reinvest in the business for growth.

Patrick Commins Smart Investor

Success is not as elusive as you might think; it is actually manageable. Managing the success of your business requires smart budgeting and forecasting, something which accountants specialise in. It is not required that you fight it out alone. In fact you can have a team of professionals to support you in managing your business success.

Financial forecasting is of course no easy task. A lot of factors change over time, making the market more volatile than it already is. Nevertheless, the foundations of forecasting do not change. Planning your future can be challenging but being pro-active and planning ahead can enable greater success. It can enable you to set the course of your business to where you want it to be.

First off, it’s important for your financial forecast to be comprehensive. This means that you prepare all the projected financial statements that allow you to determine future levels of accounts, including profits and debts. With the aid of accountants, you can develop a financial plan that’s comprehensive and accurate, making forecasting a lot easier.

Two of the most critical projected financial statements are pro forma income statements and pro forma balance sheets, as well as projected cash flow. Pro forma income statements help you project anticipated earnings within a specific period. To derive this, you generally need to establish a sales projection, create a production schedule, determine other expenditures and then compute projected profit.

However, financial planning does not end with anticipating earnings. It is not enough to show forecasted profits because what’s more important is cash-on-hand. Thus, you also need to make projected cash flows and then present a plan for managing cash flow. Managing cash flow includes budgeting and you should look to contact accountants at any stage, if you need expert help in this area. Cash is what makes your business, or any business for that matter, so it is important to stay afloat.

Projected balance sheets on the other hand provide you with information on the expected cumulative changes to your business, particularly net worth. It is not enough to just see your company’s assets grow but it is also important to understand whether you’re incurring a lot of debt as a consequence, which may be bad for your bottom line.

Projections, no matter how accurately done they may be, are subject to adjustments. Actual results can be significantly different from your projections. Your business can end up with any one of the possible scenarios identified through financial analysis. Luckily, your accountants can help you with simulating alternative outcomes and help you prepare for each one, making you always on top of your game.

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Call Austin at 0403595274


This article aims to highlight the main differences between accountants for contractors and a traditional accountancy practice.

If you are a contract worker or freelancer operating your own personal limited company, you should really be using an accounting firm that specialises in solutions for contract workers. Here are the reasons why you should consider using accountants for contractors:

1 – Specialists
Accountants for contractors will give you best advice on how to operate your company in the most tax efficient way as a contract worker. You have access to tax saving initiatives such as the FLAT RATE VAT scheme, which you may not be advised about when using a traditional accountancy practice.

2 – Financial Advice
Many accountants for contractors can also provide financial advice on mortgages, pensions and insurance which are specifically designed for contractors and freelancers.

3 – More personable
Generally speaking the service you will receive from accountants for contractors will be more personable than a traditional accountancy practice. It is likely you will be allocated a dedicated Account Manager who you will be able to contact on a regular basis.

4 – Can take the weight off your shoulders
Accountants for Contractors tend to have tailored accounting packages designed specifically for contractors that do not want the burden of administering their bookkeeping, tax affairs and general administration. It is likely that you will not find a package specifically for contractors when using a traditional accountancy practice.

5 – Fixed monthly fee
Contractor accountants should only promote a fixed monthly fee. If you do come across an accountancy firm charging a percentage of your turnover run a mile!

What should your accountants do for you?

Here are some of the accounting features your contractor accountants should offer:

-IR35 contract reviews
-Weekly or monthly payroll for one fee earning director & an additional non fee earning employee
-Quarterly PAYE payment notification
-Quarterly VAT returns
-Annual PAYE returns; including P35s and P11Ds
-Annual Statutory Accounts (Full and abbreviated)
-Annual corporation tax computations and returns
-Annual personal tax return for the director.
-Dividend administration
-Support for all secretarial matters
-Dealing with all routine correspondence from HMRC and Companies House
-Preparation of all mortgage/tenancy references
-Access to exclusive contractor financial services
-Provision of a comprehensive spreadsheet that provides
-key financial information
-Full book keeping service – simply forward all your company paperwork
-Preparation of quarterly management accounts
-Registered Office Service
-Sales Invoicing – send us a timesheet – we invoice your client
-Preparation of weekly/monthly advice sheets; highlights director payments and available profit
-Professional Indemnity, Employer’s Liability and Public Liability Insurance

I hope this article on accountants for contractors has been helpful and informative.

Accounting & Bookkeeping Group Australia has many specialists to provide tailored services for contractors. Contact us now at 0403595274 or to find out.

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Business owners commonly employ an accountant to handle the finances. Thus the finance management will be more professional and they can stay focus on other aspects of their business. If you have just started your business, below are accounting terms you need to learn:

1. Net Income: This term is sometimes called as “net profit” or “earnings”. You can obtain net income after subtracting the earning with the expenses you have spent. The remaining amount of money is what so called as net income.

2. Expenses: Expenses are charges that your business spends when selling products or providing services. Salaries, transportation and material costs are considered as expenses.

3. Liability: Liability can be defined as a debt that your company must pay on time. For a business, liabilities include bonds payable, accounts payable and taxes due.

4. Bookkeeping: This is a process of recording your business transaction into the finance book. The transactions that you have to record are income, purchases, sales and payments.

5. Asset: Asset is any item owned by business owner that has value. Business asset commonly lasts for several years such as the machine for production process, cars and office furniture. Company cash and logos are also included as asset.

6. Active Revenue: It is a payment that you receive for a service your business has performed. When your client pays for your service, the money is considered as active revenue.

7. Passive Revenue: This is revenue that your business receives without your direct involvement in the business activity. For example, if you run a business in rental property but you hire a management team to handle the facility then you receive passive revenue.

8. Balance Sheet: A balance sheet shows your business’ financial position in a period of time. A balance sheet commonly summarizes assets, ownership equity and liabilities.

9. Income Statement: Income statement explains about your business’s profits or losses in a period of time. It clearly shows the revenue you have received and the operating expenses during that time.

10. Accounts Receivable: When your customers haven’t paid the goods that you supplied, they owe the money to you and it is called as accounts receivable. The account receivables are noted as current assets on the balance sheet.

11. Accounts Payable: Accounts payable is the bills that you haven’t paid to your vendors or suppliers. The total of your accounts payable is considered as current liability on the balance sheet.

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Prior to the days of the Internet, a small business owner would usually be restricted to choosing a locally based accountants to deal with their business administration. However, since the Internet has made it easier to gain access to a multitude of services and products, a business can outsource bookkeeping duties to a national accountants, anywhere in the country. With the importance of location out of the equation, the other factors to consider are whether the online national accountants is qualified to deal with your business, the cost and access details.

A locally based accountancy would have been preferable to a national accountants before the Internet, as frequent trips would have to be made to hold meetings, deliver documentation and other aspects. An accountancy firm which was based locally would keep travelling and communication times and costs to a minimum. Sending information by post was previously the most convenient method to communicate, even with a local accountants. However, if any queries arose, or further information was required, the telephone was often the only method of communication left open to both parties, which isn’t always convenient and can be expensive.

As a large number of people now deal with all aspects of their life online, it makes sense for a business to do the same. Online accountancy is low cost, speedy and convenient and also allows you to select an accountancy from anywhere in the country. A national accountants will offer the same service as a locally based accountants, but will provide increased accuracy using real time information, and convenience. The costs will be kept low as the national accountants maximise the efficiency of online accounting to reduce overheads, passing the savings on to the client.

When a business owner is deciding which accountant will be beneficial to the company, it is imperative that they decide whether face to face contact is important to them. A large number of business owners are happy to submit documentation and provide information, leaving their accountant to deal with ATO. Some business owners would rather meet occasionally to discuss their business, which would probably mean a locally based accountants for convenience.

Deciding on a national accountants gives greater choice than being restricted to a locally based accountancy. The size of the accountancy should also be considered, as a business needs attention all year round, especially when staying within relevant filing deadlines. A small, locally based accountants may provide an excellent service, but what happens if they are taking annual leave or are sick? Choosing a national accountancy will provide freedom to choose a company with several accountants who are able to deal with a business. An online accountancy provides freedom of choice so that a business owner will be able to manage his business, knowing that administration is dealt with in a timely manner, wherever they are situated in the country.

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