Keen to hear details.

Tim

Everyone remembers the Beached Az whale – the story is pretty amazing.

Friend A and Friend B having a laugh – Friend C helps them make it into an animation. Animation goes viral (on the back of most Aussies sending it to their Kiwi mates.

Result? Multi million dollar business…

But how do I do it for my business?

No idea,

The one take away I got was – DON’T OVERTHINK IT.

Keep things small, simple and get some feedback. If it wasn’t funny, no one would pass it on.

How could you make a clip that was:

1. Entertaining

2. Short (ie boiling-kettle)

3. Would be worth sending to your mates.

Tim

. 

Wow  – complicated business structure in 2 minutes – I dare you.

 .

You wanna get paid? You wanna make a million? You ain’t doing it as an employee.

 .

So you need a business. But which one? Sole Trader or Company, Trust or Partnership?

 .

For insurance purposes – me and you – I’m going to assume that you work from home (ie web design), that you do not produce financial information (ie not a bookkeeper). Because if you did, it would be prudent (love that word) to get Professional Indemnity Insurance (protects you from being sued if you make mistakes) and Business Insurance (protects you from getting hurt in other businesses, and them from getting hurt in yours) Also no staff – KISS! Go, go go!

 .

ABN, boom. Register online. Sweet you’re in business. Try names, also plug into ASIC -  for more information about business names goto here.

.

Business name – Eep – what name do I register? Did you register Timothy Fairweather as the business? Then that’s okay. I’m worried? If you picked another name that is NOT your personal name (Timothy Fairweather Pies) you need to own that name – head to Dept of Fair Trading in person, or mail it  (Seriously I know.. online anyone?) register a name for $152 dollars. In person, next to Central station. Too EZ. Back to your old job by 2pm. Nobody the wiser. You must display this name where you do business. Make it pretty.

. 

Now when you do your personal tax return you don’t just need group certificates, you’re also a little ‘YOU’ business. That means income and expenses.

 .

Income means you issue invoices? You do, do that right? Set up a MS Word template for now to get you going, save them on your computer for your accountant later. Issue them, include your BSB, get paid, WIN.

 .

Invoicing means you need a business address, an invoice number and – lo and behold what about GST? Are you going to invoice over $75,000? Great then you must, if it is applicable to what you sell and who you sell to, add GST to the total. What’s applicable – check here, email me.

 .

(Do not include GST in your original price because then you would be losing 10% of your profit. Fail.

 .

What’s GST? You add it on to your price so the person buying it pays for it. That way they pay you the tax and you pay it to the ATO. Think tax collector of Sherwood Forest without the pantaloons.

 .

Under $75k? You serious – remember that’s GROSS sales, less expenses (lots) and less tax (lots) equals small profit for Timmy (Fail). All work and no profit make Jack a dull boy. And go back to his old job.

 .

You picked quarterly BAS didn’t you? You’re more likely to have the money to give the GST to the ATO that way. GST is the tax you collect for the nerdy little guys. Hold onto it, it ain’t yours.

 .

Okay, business check, name, check, GST registered check, invoicing check, expenses… where did I put that box of… right, here it is. Paperwork, bills, banks statements, receipts, bus tickets, ATM printouts, Woollies dockets. Hold onto those.

 .

That’s what’s going to stop you paying more tax than you should. They are like little bits of gold. Except just not as heavy.

 .

Somebody gotta sort through that stuff – organise it, file it and get you a spreadsheet of what they were. Or set up some online cheap software for you to do it in future.

 .

You’ve got a couple of choices with the bookkeeping:

1. Give it to an outsourced bookkeeper like Bare Figures Bookkeeping (PLUG, PLUG, PLUG.) they is handy because they do your BAS for you, set up your software and let you know the easy way to do it in future. That way you can use them again or those friendly cats will teach you to DIY.
2. Give it to your neighbour – then they’d know about those naughty personal loans no one knows about.
3. Give it to your very, expensive accountant – BOO. You suck.

 .

It must get done before your tax return – so those expensive tax guys and girls can slam through it – all info there, all paperwork, all neatly filed for them short-sighted folk. Make it easy, save money – WIN.

 .

2 minutes – sole trader set up, ABN, GST, Invoice, books, tax – WIN

.

Read time: 2 minutes

.

So you have a business – right?

.

And your business earns you money – right?

.

Then there are good odds on you paying tax.

.

The way I see it – you’ve got three (3) options:

.

(1)    Just ignore the date and keep on trucking – FAIL

(2)    Take note of the date and do nothing – FAIL

(3)    Accept the date and make quick decisions that will save you money – WIN

.

Decide NOW – will you do your tax return or will someone else (Hint: Are you an Accountant?

.

Decide NOW – will you be responsible for getting all your paperwork together? (Hint: Ask your Mum?)

.

Decide NOW – how long you will spend, schedule it and make sure you have necessary tools (Hint: Internet, file, hole punch, stapler, MS Excel, list of remaining items.)

.

Take Action –WIN – all done. Now Mai Tai’s and swimming pools.

.

Yes you could wait. Yes there are more important things to do. But if you’re worried about it now aren’t you going to worry about it until October anyway? Or next year? Give yourself a break. WIN

Summary: Who do you have to be to take your business to the next level?

Taking the time out (from watching the World Cup of course) to enjoy a delicious coffee in Leichhardt with my girlfriend, I stumbled across an interesting article on expansiveness.

.

Wow, thats a big word.

.

Business – Personality – Expansiveness.

.

What I got from this interesting post was gap – thinking. (the real thing went like this. The idea that getting to the next stage requires a different kind of thinking.

.

Who do I want to be (successful, fun accounting business with great clients who I help make boatloads of bank.)

.

Where am I now (successful, fun accounting business with great clients who I help make moderate amounts of bank.)

.

What would it take to get to where I need to get to? EXPANDING who I am, what I’m committed to, who I associate with and who I learn from.

.

Who do you need to meet to expand your imagination of you and your business?

.

Intro: In order to really understand income tax and why it exists, here’s the shortest example I’ve come up with. Let me know whether it helps.

.

Summary of Income Tax for Beginners:

1. More you earn, the more you pay

2. Once a year

3. Self-assessed

4. Meant to be confusing

5. Rewards those who learn how to use it

6. Case law – it’s living thing

.

So…. You are the King of your country – what do you call it? Timland, Tim’s Kingdom, the Hanging Gardens of Timalon. You get the idea.

.

Now you’ve thrown some massive festivals as King or Queen, or both. I dunno what you’re into. I’d be a King in case you’re wondering. After weeks of the finest and most lavish festivals in the land, you’re pleasant but rather conservative (boring) treasurer (accountant) comes to you in a hurried mood.

.

“You’re highness, we have run out of cash. The royal coffers are empty and you haven’t paid my latest invoice.”

.

Not one to waste your time worrying you remember that as King you make the rules. You will simply make some rules to get some money. The most obvious rule? Your people will simply give it to you.

.

“We shall levy taxes upon the land.”

.

“Sire, that is in my opinion, proof of your brilliance and further evidence for why you are King.” Not one to suck up much.

.

 “And how are you proposing they will do that your Grace?”

.

On a roll you continue: “Well, the peasants have little, but the rich, have plenty. Those fat landowners shall pay the most, the peasants the least. And they shall do it at least once a year.”

.

“And what of the largest businesses, the shippers, the factories, how shall we levy this ‘tax’ you call it upon them? They will not be happy with this tax you have laid upon them. What if they were to leave? To sail to other kingdoms where the women are more beautiful, the festivals free and the gravy hot?”

.

“Gravy?”

.

“Yes, and of course, there were less harsh ‘taxes’ as you call it.”

.

“Because they shall provide us with the most money we will not be unfair to them. There will be many benefits we  pass onto people who do business, as a business. But we will be harsher with them and prevent them earning such fat profits if they fall behind in the calculation and payment of such bounty to me. They shall give plenty and often. “

.

“Brilliance once again, but short of having a giant queue, how will such a great idea be pulled off. I have a staff of, well, myself your Highness. How are we going to count it? And where shall we put it? And what shall we do with it? And more importantly, how will you place such a great trust on your apparently loyal subjects. How, my King, are you going to know whether they are telling the truth?”

.

For several days you ponder just how such an ingenious plan will be pulled off. You do not have the manpower to check everyone. Hence, you will punish harshly (I’ll write that one soon). You come up with a plan that is in essence, a meritocracy (that’s where the nerdier you are the better you get to feel.”

.

“My treasurer. As I will be trusting the common peasant with the calculation of my riches it must be simple enough for them to comply without penalty. But not simple enough that they could work out how to cheat me. They must get by without using it for gain. I need sufficient mystery. A shroud of black-magic over this tax. Sufficient so that only the biggest nerds could work it out.”

.

“Your Excellency, you have no need for apprehension over these nerds. They lack the personal skills with which to speak with the common….”

.

“I don’t know what you just said. But if I did, I would say this. Those who understand this system – us – will benefit the most. We shall make it impossible to disagree. Or at least, if you think you are entitled to a lower tax you must take us to court and prove it to the judiciary. Cripplingly expensive. But I suppose if they do we should give them a fair go.

.

“My liege, what shall we call this amazing manna from the heavens?”

.

“But Income Tax of course. So that half way through the year when we usually would run out of royal funding, the people will come to us with their pieces of parchment and sacks of royal bounty. And we shall stand and point at them and say ‘In Come Tax, In Come Tax…’”

.

Summary:

• Rich people spend because it’s tax deductible, poor people never find out until it’s too late

.

Besides BLATANTLY copying Robert Kiyosaki’s brand, message, etc. – I think there was a valuable point he left out about tax.

.

Namely – that in his series (recommended reading) he alludes to building your ‘team’, but doesn’t help you out in what to do with them. I’ll fix this for you.

.

Here’s my premise:

Poor dad’s accountants – talk to you about last year (boring, who cares)

Rich Dad’s accountants – talk about your future ($$$)

.

Could it be any simpler? Sure, that tax agent outside Woolworths is only $60. But let consider another option for you. Say you spoke to a friend who likes their accountant. You ring them up and ask how much for an Income Tax Return – see post above it unsure) They say, $150 bucks. Then you ask, look, how much for one of those and a one hour session on the back end of it where you tell me how I can pay next to no tax by earning money in the way the ATO wants me to. Ask:

.

• How much should I be earning from this job, that share, that property?
• Can you give me a list of the things I can buy (deductions) that will lower my tax?
• What can I study that is tax deductible?
• What about travel – how could I work it so I pay less?
• What about home office?
• What about hiring my girlfriend in my business? Or my sister? Or my Mum?
• What about HECS, when will I be paying that?
• Medical insurance – is it better to buy it through my business or don’t worry?

.

I swear I could go on for hours. It’s not your accountants fault. When someone sits down in front of you and pays a fortune in tax and then pays their invoice and leaves. You can’t make them care.

.

But when someone sits down and wants to learn all the boring stuff you’ve been studying for years to save some cash – I’ll talk for hours. If they promise to pay.

.

This year – why not pay for a sit down and learn something – I GUARANTEE IT WILL PAY FOR ITSELF WITHIN THE FIRST YEAR.

.

Products they pay for themselves – now that rich!

.

Summary:

1)      Paying tax is a reward for earning profit – through your time, or money.

2)      Deductions are a reward for following tax law. Earn like they say, get the benefits.

3)      Paying too much tax is like missing out on the 2-for-1 pizza coupon offer that sits on your fridge. It’s not life changing, but it is annoying. And it’s unnecessary.

4)      Knowing what you need to pay tax on will expand what you can do with it

.

So what are we going to do about it?

.

Yesterday we agreed that being afraid of tax was a bad thing, right? Good.

.

Where you’re at is probably –

“Tim, chief, it doesn’t matter. I walk in to my accountant. She tells me what I SHOULD HAVE done 11.5 months ago. I feel lame, she looks disappointed, then she tells me all the money I haven’t saved. Awesome. Why not start every day like this. I’m so amped. I love tax. ”

.

Totally agree. Remember tax agents run a business. The faster they pump your tax return out, the more they can do and the more money they make. It’s your conversation. Make it count. Here’s how.

.

Today I’m going to expand your vocabulary. Before you can have a conversation about tax, you need some vocabulary to do so:

• with your accountant,
• with the ATO,
• with your family,
• with your boss,
• with you staff.

.

Above you can see that deductions, what lowers the amount of tax you pay is not linked to you. It’s linked to very, large volumes of bland tax law.

.

So, what do you need to pay tax on?

.

First: You are an individual. That means there is a great chance if you make any money in your life you will need to pay personal income tax. Tick. Write down, personal income tax. In order to pay that it is vey important you calculate it correctly – hence, personal income tax return. It’s called a return because it’s up to YOU to return to the ATO what you think it would be. By ‘you’ I mean, you and your accountant. Not whatever your accountant says, it’s your life, how could they possibly know everything about you in 25 minutes outside Woollies.

.

Before I go into this any further I’ve taken the time to write you the quickest 2 minutes article on how to understand the entire Australia tax system. It’s brilliant, or at least that’s what my Mum thinks. Trust me you will go ‘Aha’ at least once. Hopefully not at the end… somewhere in the middle. Excellent.

.

Second: Some of you may have an ABN. Get one here. You are part of the first group. Though it’s likely your tax return will be more complicated because you think If you have an ABN your whole life is now deductible. No. Some of you yes. If you want deductions, pick a job that matches your lifestyle – you like live music, be a musician. You like science fiction DVDs?, start a blog and write for a sci-fi channel. Otherwise, stop telling me stories about how you only go to the gym for marketing your business.

.

But keep telling me about the Prada bag you had to buy to impress your clients. I love that one.

.

Third: If you’re a partner in a partnership see ABN above. You will need a partnership tax return and an individual tax return. Because the former will calculate what to put in the latter. Simple no?

.

Fourth: You may know what the word trust means. Few do. Even among Accountants. If you have a trust (you are the trustee) or are part of a trust (beneficiary) there is a tax return that concerns you too. Tick here if so.

.

Fifth: Companies are our last category. You will definitely know if you have one of these. I will write some helpful info for you if you find this process overwhelmingly confusing.

.

Sixth: Are you registered for GST? If so, I would hope there were some Business Activity Statements lodged by you (Sound of crickets and tumbleweed.) It’s that sounds which keeps Bare Figures in business! I know you don’t like them. If you want help to do it yourself go here, or ring Bare Figures if you want the pros to save you some money.

.

So what did you learn? Hopefully you now know what your accountant is going to talk about when you give them a call.

.

If you didn’t learn anything and are living the dream – please write comments below on how you did it.

Timothy Fairweather

.

Afraid of tax?  Me too 

.

The Tax Office voicemail that started it all… I call those nerds all the time, and they’re lovely. They’re so helpful -

.

“Thank you Mr Fairweather, would you like us to mail it to you or perhaps an email would be easier, no it’s no trouble at all. Thanks for calling the Australian Tax Office.”

.

 But when I get a voicemail message from Mark at the Tax Office to call me back – I almost pooed myself.

.

 Seriously, I’m a Chartered Accountant, there isn’t anything they could say to me that I wouldn’t either:

.

 (a) be able to understand /  explain / clear up; or

 (b) that I couldn’t  look up in a book and then do similar.

.

 And still I was shaking.

.

 How must the average person feel? How anyone could possibly run a business with that kind of fear floating around.

.

Disempowering? Much?

.

Like when a police car pulls in behind you at the lights and you start driving at about 40km/h in case you do something wrong!? What’s with that.

.

Clearly – there’s a lot with that.

.

For the past few years I’ve wondered how my clients ACTUALLY FEEL like about tax.

.

When they say,

• “I’ve NEVER understood tax,
• I don’t know what you’re talking about,
• What’s a BAS,
• Why is that deductible.
• I’ll NEVER understand it.
• I just give it to my accountant and then pay WHATEVER bill they give me.
• What’s the point?

.

I’m sorry.

.

I totally agree with you. I can imagine what that feels like. And it feels awful. That was the worst 45 minutes of my life. From voicemail, to fear, to cleared up.

.

If you’re still afraid then, then this blogs for you.

Timothy Fairweather

Preparing BAS returns can be an absolute nightmare without a bookkeeper compiling your records together first.

But if you must, and here at Bare Figures we encourage our clients to understand business tax as much as possible, here are the easy steps for you. Please remember that submitting incorrect information to the tax office is an offence that carries penalties.

Steps to completing your BAS statement

1. Are you registered for GST?

Before you start completing your BAS statement make sure you are registered for GST. A quick check with your accountant, in your files or on ABN Lookup (just plug in your ABN) will help you work out whether you are registered or not.

2. Are you using cash or accruals for calculating GST?

Cash accounting for GST – means that you pay GST when money changes hands.

Either your sales invoices are paid into your account (So you charge $500 plus GST to your customer, they paid you). So you must send that GST portion back to the ATO. Or you purchased something and received an invoice, then you paid it. You get to keep that bit of GST.

Accrual accounting for GST – means that you pay GST when you receive or raise invoices

To use the example above – once you have raised an invoice for a sale, you are liable to pay that GST to the ATO whether your client has paid you or not.

3. What period are you preparing a BAS return for?

BAS returns are either: Monthly, Quarterly or Annually. Make sure you are completing it for the right period.

4. Get your records together

Your business records will be bank accounts that have business transactions, receipts and invoices relating to those transactions and any cash transactions (with receipts / invoices).

That’s it. Oh wait, here’s the fun part.

Record in MYOB, Xero, Saasu or Excel, all transactions above that you have valid receipts and invoices for. Remembering that you will need 4 columns:

- Date of transaction

-Amount in or out

-Amount of GST

-Description

See here for the rest of the article: