The decorations are up and the children are eagerly anticipating Santa’s arrival…oh wait, that’s the wrong ‘end of year’!

What I meant to say is that business owners’ thoughts are turning to tax time and what they can do to reduce the inevitable contribution to the government’s coffers.

To help you with your end-of-year deliberations, I offer these timely answers to your tax deduction questions:

1. Is it too soon to start thinking about tax?

I never think it’s too soon to start thinking about tax, but you may consult the calendar and think that July is a long way off. I’ve got news for you – it’s only 54 days!

2. Should I bother?

For taxpayers on the top marginal rate, the government is lining up to remove 46.5% of your income over $180,000 per year (47% if the NDIS scheme gets through!). This means that for every tax-deductible dollar you spend, the government will give you 46.5 cents back. Even if you would have spent it next year (and therefore had the deduction next year), it is better to save the tax this year. So, if you’re thinking of making some purchases to increase your deductions, it’s probably a good idea. If your tax rate isn’t as high as this, you’ll still make savings – just not as much.

3. What should I look for?

First, look at your usual business deductions, which may include printing and stationery, consumables, telephone, interest payments and of course superannuation. You need to ensure that you are eligible for these deductions before you commit.

4. What should I avoid?

Motor vehicles are tricky, as some taxpayers may be able to claim prepaid lease charges. Also, the difference between small business taxpayers and regular taxpayers becomes an issue – if you are a regular taxpayer, just buying the vehicle will only entitle you to claim depreciation for a short period of the year (and therefore it won’t make much difference). If you’re a small business taxpayer it’s a better deal…see, it’s tricky!

The key here is to only buy things that you really need (a good life principle, actually!). As I explained above, if you spend a dollar, the government will give you back 46.5 cents at the most. This means that it has really cost you 53.5 cents.

You’d be better off wealth-wise if you didn’t spend the dollar, gave the government their 46.5 and kept 53.5 in your pocket! Buying a tax deduction is never a good investment.

At the risk of sounding like a broken record, now is when you need to start thinking about these things. As you can see, a lot of the above strategies involve spending money. Use the time between now and June 30 to gather cash resources and decide which purchases are really a good tax deduction. If you can’t work it out, your accountant should be more than happy to help!

It indicates business confidence in the area, and initiative being shown by would-be entrepreneurs. The fact that this has made the news means that other areas of Queensland and certainly Australia are not as confident.

However, the real statistic that we should be focusing on is this: how many of these new businesses survive their first year?

While we don’t have statistics for the local area, nationally the chances are not good – only one in three small businesses will make it through.

So, for all those new businesses (and those wanting to join the in-crowd!), here are a few ideas on how you can make it to your first birthday – and hopefully much further.

1.    Get your finances right.

It may come as a surprise that this is the first thing on the list (or not!). I have seen many businesses that start out without sufficient capital to survive their start-up period. This is usually caused by overly optimistic estimates of income, and/or a failure to identify all of the real costs of business. Making sure you have adequate cash reserves available might help you over this hurdle.

2.    Get your plans sorted.

Careful planning before you take the leap will help you quantify your income and expenses, so that you can be realistic about the profitability and cash requirements of your new business. Obviously, professional help is a great idea and will give you greater confidence that you have all the bases covered.

3.    Get clear on your target customers.

Whatever you’re doing in business, you will have customers. Knowing exactly who your ideal customer is will bring clarity to your marketing and your service execution. Failing to hit the mark here can bring down even the best of ideas. You also have to make sure that your ideal customers actually want what you’re providing – a small error but a common one! Sometimes businesses offer a solution that’s in search of a problem…but that’s not the way to go.

4.    Get the right accounting system for your needs.

A good accountant is invaluable to a start-up business – chances are they’ve seen similar businesses rise and fall and will have sage advice for you. They can also advise on what accounting system best suits you – there’s no need to be driving a Hummer when what you really need is a Smart Car! Different systems suit different businesses – but we’re finding that Xero suits most!

So the bottom line is – before you go out on your own, make sure you’re properly prepared. If you don’t have a trusted advisor (like an accountant), come and find one! If you do have one, make sure they’re giving you the most bang for your buck.

We’ll see you on your first birthday!

Love it or loathe it, for many people debt is a way of life, and the constant struggle to meet all obligations can become overwhelming, as the statistics for personal and business bankruptcy confirm.

So, you might be surprised to hear there is such a thing as ‘good debt’. This usually refers to debt that results in you having growth assets – such as a house, investment property, shares or a business. ‘Good debt’ also refers to debt that has the potential to provide you with tax-deductible interest.

The idea is that the growth and income from the asset will exceed the interest cost (after tax), and so your overall position will be improved. However, if the growth and/or income does not happen, ‘good debt’ can very quickly become ‘bad debt’ – that is the risk of borrowing to acquire assets.

Good debt gone bad is not the only sort of bad debt there can be. Credit cards that you can’t afford and personal loans for non-essential assets (think boat or holiday!) are bad debt – simply because the sky-high interest rate is non-tax deductible. This doesn’t solve anything!

And then there’s borrowing from the bank of Dad…but let’s not go there.

So, how can you make good debt work for you?

1.    Get really disciplined and get rid of the bad debt.

This may be tough, but if you ever want to get ahead and plan to have good debt, the discipline of eliminating your crippling credit cards is a valuable skill to learn. Identify the debt with the highest interest rate and direct all of your spare cash into paying that one off…then onto the next one! The key here is interest rates – if you have a HECS debt lying around, don’t worry too much about it as the interest rate is extremely low!

2.    Identify quality assets to invest in.

As I mentioned above, it is important that the assets are going to grow in value and/or provide you with an income. In most cases, you need to take a longer-term view – there are many get-rich-quick schemes out there, and sometimes they pay off in the short term but can ultimately damage you. Does anyone remember Storm Financial? Borrowing to acquire quality assets is a get-rich-slow scheme, but one that works.

3.    Choose your advisors carefully.

Unless you are a sophisticated investor, you will need some guidance along the way.

Remember, it is safer for an advisor to say ‘don’t do it’, as you’ll never know whether that was the right advice or not! You need to find someone who has a good track record and has your best interests at heart – judge wisely!

There are always risks with any investment and please don’t take this article as advice to invest – this is something that you need to talk to a qualified financial planner about. But given the advantages of good debt, it’s definitely worth looking into.

Now, you may say that they deserve it – your pension isn’t anywhere near that big! Clearly, this is what the government is counting on – a good dose of Tall Poppy Syndrome. Whether it’s another Mining Resources Rent Tax win still remains to be seen…but I have a sneaking suspicion it will be.

So, what do the changes mean for you?

The most likely change to affect you is the increase in the concessional contributions cap. In case you didn’t know, you can only contribute $25,000 into your super fund each year if that contribution is claimed as a tax deduction. For people over 60, this limit is to be increased to $35,000 per year from 1 July 2013. For those aged over 50, the limit will be increased on 1 July 2014, and then made progressively available to younger age groups by 2018.

While you may breathe a sigh of relief that your income stream is not going to exceed $100,000, you need to remember that governments are notoriously bad at indexing these caps – and it is quite possible that in 20 years time, your income stream could be caught by the long-standing actions of this government.

It appears that defined benefit funds are in the firing line, but if you’re in one of these funds (usually associated with a government job!), you will probably not be impacted unfairly. Again, the proposed changes apply to income streams over the $100,000 mark, but there are some calculations needed to decide whether this cap is in fact breached.

Whether the State Government is going to tinker with your defined benefit fund is another issue altogether…let’s leave that for another day!

While we are on the subject of superannuation, let me address another elephant in the room.

I am finding that business owners are largely unaware of the increase in superannuation guarantee liabilities which will come into play on 1 July 2013…in just a few short months. Instead of the standard 9% contribution to your employees’ super, businesses will now be required to chip in 9.25%.

This may not seem like a huge change, but for a business with a mere $10,000 per week payroll, this adds up to $13,000 over the whole year. Have you got a spare $13,000 sitting around?

Small businesses need to plan now and adjust for this increased expense when thinking of salary reviews, pricing strategy and even taking on new employees.

If you’re unsure of what this could mean for your business, please talk to a trusted advisor – and if you haven’t got one, go get one!

If the topic of super reforms does come up around the dinner table, please do remember that these reforms haven’t even gone through Parliament yet, and may in fact be a whole lot of ado about nothing. The super guarantee increase is set in stone though, so don’t be caught short.

During my many years as an accountant, I’ve seen many examples of situations where this exciting news has been forgotten – and the accountant has had to spend far too long sorting out a bookkeeping disaster caused by the business owner thinking ‘this is easy’, or a misguided trust in an incompetent bookkeeper.

Even now, we are known to receive visits from distressed business owners who have been let down badly in the record-keeping department by their bookkeeper. This usually is a situation where there has been a significant change in the business (either a restructure or a change in volume of sales), which the bookkeeper has failed to properly negotiate.

Also typically, the situation has been allowed to remain in shambles for far too long, as the business owner often does not realise the extent of the problem – or has been promised that the situation will be fixed next week!

Now this is not to say that all bookkeepers struggle to keep up, and I have dealt with very competent bookkeepers that produce high quality, useful information. However, the extent of regulation in the industry is fairly non-existent, and anyone with a laptop and a basic accounting program can offer up their services (with varying levels of success!).

You may use a bookkeeper for many reasons, but the main one is undoubtedly cost. For a small business owner, it is far cheaper to outsource your bookkeeping than to attempt it yourself – and they will always be cheaper than an accountant.

So, what should you expect from your accountant?

Accountants have spent many years studying to understand and interpret (and ideally explaining) the significance of your business accounting records.

The exciting thing is that these days, the technology is available to produce meaningful reports that help you understand what’s going on in your business. You will still need the assistance of your accountant to interpret these reports – but from my experience, the new-style reports are quite easy to explain for the accountant and quite easy to understand for the client!

You have (supposedly) invested a lot of money in your accounting system – and the best way to get a return on that investment is to analyse the end result. The best person to help you with this is, of course, your accountant.

If your accountant is unable to help you in understanding these reports, perhaps it’s time to find one who can make it all clear for you. Don’t be afraid to ask!