Tag: bookkeeping

taxation & accounting

Business income: it’s not just cash

Posted on | by Allan Hall

Clothing, jewellery, gaming products, flights and crypto assets are just some of the things you might have to account for in your tax return as part of your business income.

If you received these or any other non-cash benefits instead of money for your goods or services, or as a tip or gift – you must record them as income at their market value.

This means you record the cash price that you would normally have to pay for those goods or services.

You may be able to reduce the assessable amount of a non-cash benefit you’ve received, by the amount you would have been able to claim as a deduction if you had purchased the item to be used in carrying on your business.

It’s important to report your regular forms of income

Such as:

  • cash and digital payments
  • vouchers or coupons
  • business investments
  • online and overseas business activities
  • services you provide using your personal effort and skills (personal services income)
  • the sharing economy, such as ride-sourcing
  • assessable government grants and payments
  • the value of trading stock you take for your own use
  • payments from insurance claims.

There are some payments that aren’t assessable income, so you don’t need to include them on your return, such as:

  • non-assessable non-exempt (NANE) government grants
  • bona fide gifts or inheritance
  • GST you’ve collected
  • money you’ve borrowed or contributed as the business owner.

Always keep accurate and complete records to prove the income you report and the expenses you claim as deductions.

Remember, registered tax professionals like Allan Hall in Brookvale can help and advise on your tax.

CONTACT ALLAN HALL BUSINESS ADVISORS

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Xero research reveals business mistakes

Posted on | by Allan Hall

From working for free to hiring the wrong staff

Xero research reveals 83 per cent of business owners admit to costly mistakes

Xero, the small business accounting and bookkeeping platform, has released research revealing some of the most common learnings shared by Australian small business owners. The findings highlight that hiring the wrong or inexperienced staff and working for free or at low cost are considered the most costly business mistakes, impacting more than one in five (22%) small business owners.

The ‘Do Better Business’ research, which surveyed more than 1,000 Australian small business owners and leaders, not only sheds light on the challenges faced, but offers invaluable insights for businesses embarking on a new financial year, and provides helpful learnings for aspiring entrepreneurs.

“We know running a small business can be incredibly rewarding, enabling people to pursue their passions or achieve greater flexibility. But, as our research has highlighted, it also comes with its unique set of challenges, which have only been exacerbated by a turbulent economic climate,” said Will Buckley, Xero Australia Country Manager.

“As the new financial year commences, it’s a timely opportunity for business owners to reflect on the year that was and embrace key learnings that will pave the way for future success.”

Taking risks and learning from setbacks

Owning a small business is a constant learning process, with the majority (83%) of those surveyed admitting to making costly mistakes over the course of running their business. In addition to hiring challenges and working for free, working with the wrong partners, suppliers and investors (18%) and working with family and friends (12%) were other blunders. Additionally, nearly one-fifth (19%) reported spending every dollar of their personal savings in the early years of running their business.

Among the biggest learnings was a need to implement strong financial management practices, with nearly three-quarters (73%) of those surveyed rating this as the top three priorities they believed small businesses starting up should focus on. This was followed by building a strong network of industry contacts (63%), working with an accountant or bookkeeper (46%), and asking for help when struggling (46%).

Greater flexibility driving business ownership

There are many reasons driving Australians to business ownership, but the survey revealed a desire to be their own boss as the number one reason for 64 per cent. This was followed by seeking greater flexibility (61%) and wanting to pursue a passion or dream (41%). Nearly three-quarters (71%) of small business owners, however, admit to delaying starting their own business, with financial concerns being the number one reason holding them back (35%), followed by a fear of failure (21%). Despite this, 65 per cent of business owners surveyed by Xero say there’s never a perfect time to start a business, but they wish they’d done it sooner.

Small business ownership is also not without its sacrifices, with one in five (20%) small business owners from the survey reporting they missed a significant life moment like the birth of their child, a wedding or a birthday in the early years of running their business. The majority of those surveyed (86%) also wish they could prioritise their personal boundaries more while running their business, especially around their physical and mental health (43%) and spending time with their family, friends or partner (40%).

“Fostering an environment where Australians feel confident to pursue business ownership and are supported throughout their entrepreneurial journey is essential to ensuring a prosperous small business community and a resilient economy. We hope that by understanding some of the challenges facing small businesses, together with industry and governments, we can provide the right tools and technology to ensure businesses have the best possible chance to thrive this financial year and into the future,” said Buckley.

The generational divide and young small business owners holding back

The survey revealed it’s tougher for younger people to get into business ownership, with Gen Z reporting they were more likely to face negativity and discouragement from friends, family and associates about starting their own business venture (77%) compared to Baby Boomers (60%).

The fear of failure was also more common amongst young business owners and entrepreneurs with 29 per cent of Millennials saying they delayed starting their business because they didn’t want to fail, compared to just 12 per cent of Baby Boomers. Despite this, the flexibility of being a business owner was a central reason for 68 per cent of Gen X business owners, with 60 per cent saying they are now achieving this goal.

Considering Xero for your business? Alliott NZ’s Xero Certified Advisors in Auckland are here to answer any questions or to help your business upgrade to or optimise using Xero.

About Xero’s research: The research was conducted by YouGov of 1,022 owners and key decision-makers of businesses with fewer than 50 employees in Australia. Fieldwork was undertaken between 22-30 June 2023.

At Allan Hall, we have extensive experience using a wide variety of accounting software packages and can provide advice on which software is right for you.

CONTACT ALLAN HALL BUSINESS ADVISORS

Moving to new Xero Reports

Moving to new Xero Reports

Posted on | by Allan Hall

Xero is retiring older versions of their reports on 31 July 2023

In coming weeks, Xero will be transitioning some favourite ‘starred’ reports from the old version to the new version.

When users click on these reports in their favourites list, they will be automatically redirected to the new version of that report. This change is being made because Xero is retiring older versions of their reports on 31 July 2023 and they want to ensure that Xero users are prepared.

The new versions offer more flexibility and customisation, quicker access to insights and deeper analysis of business performance. Xero is aware that this change may take some time to get used to and is giving users plenty of time to make the switch.

Using new Xero Reports

Xero is urging users who haven’t yet switched to new reports to start moving their work across now. This way, there is time to adjust before older versions are retired:

  • Users can take a product tour of some of Xero’s most popular reports, such as the new Profit & Loss or Balance Sheet reports, and find a tips and tricks panel on the right-hand side showing links to support articles and how-to videos
  • Check out Xero’s reporting playlist on YouTube for help on tailoring reports in Xero
  • Start using Xero’s layout importer tool in the Profit & Loss, Balance Sheet and Budget Variance reports to bring saved layouts across to new versions
  • If needed, users can return to the older versions via the overflow menu in the Report Centre until 31 July 2023.

At Allan Hall, we have extensive experience using a wide variety of accounting software packages and can provide advice on which software is right for you.

CONTACT ALLAN HALL BOOKKEEPING

invoice

Why businesses should embrace eInvoicing

Posted on | by Allan Hall

eInvoicing is a new way to send and receive invoices electronically directly between accounting systems

How? It’s all done via a secure platform called the Peppol network.

Not only does eInvoicing help facilitate faster payment times, but it’s also more efficient, accurate and – importantly – safer. In fact, everyone from enterprises to software providers and government agencies are jumping on board. And it’s easy to understand why. 

In Australia, eInvoicing represents a $28 billion opportunity thanks to increased efficiencies. What’s more, its security features make it a no-brainer for businesses of all sizes, particularly in today’s climate where cyber safety is a top priority.

To help learn more, Xero talked with Xero advisors Caryn Hill and Gabrielle Crooke to discuss their experiences and the benefits they’ve seen for small businesses. 

What convinced you to look into eInvoicing? 

Caryn: What excited me most about eInvoicing is the security aspect. Invoices travel straight from one accounting software to another via the Peppol network, meaning an email or PDF can’t be lost or tampered with. Everyone who uses it also has to register for the network (as eInvoices can only travel between registered entities), which offers peace of mind in knowing all the information is verified. 

Gabrielle: I have a few clients with quite a high turnover of Bunnings invoices. After I learned that Bunnings is a Peppol-registered company, I talked to my clients about eInvoicing as a potential solution. It’s awesome to see companies like Bunnings leading the way. Especially as research shows that more small businesses would register for eInvoicing if big business suppliers (e.g. Telstra, Woolworths, Officeworks) sent invoices directly to their accounting systems.

Why should small businesses embrace eInvoicing? Tell us about the benefits. 

Gabrielle: Alongside the security features already mentioned, the greatest benefit I’ve seen for small businesses is how quickly invoices appear in their accounting software. It’s faster and more accurate than any other system I’ve seen before, which makes reconciliation and paying bills easier for clients. As a Xero advisor, this reduces manual processing errors like double-ups or wrong dollar amounts – I have complete confidence that all the data coming through is correct. 

Caryn: In all my years as a bookkeeper, I don’t think I’ve ever had a month where every single invoice is just there. But eInvoicing has changed this. Business owners no longer have to scroll through their phones to find a blurry photo from weeks (or even years) ago or try to decipher the numbers on a faded receipt. It’s so easy to verify, reconcile and approve everything at the end of the month because it’s guaranteed that the data has been exchanged. This minimises processing time for me, as an advisor, and my clients, meaning we can both focus our energy on more important tasks.

Walk us through the registration process in Xero. 

Caryn: It was amazing how quick the registration process was for my clients. Everything was just there. For those with a Bunnings Trade account, we didn’t even have to notify them – the invoices immediately started coming in, which was fantastic to see.

Gabrielle: I found the registration process in Xero to be self-explanatory. After I had authorisation from my clients to sign them up, I followed the prompts; it was as simple as that. 

Where can small businesses go to learn more about eInvoicing? 

Gabrielle: My tip for anyone interested in eInvoicing is to do your research. According to Xero’s data, one of the top barriers to adoption for small businesses is not knowing enough about it. This is why Xero has its Resource Hub with plenty of helpful information to get started. And Xero advisors can also guide you through the process.

Caryn: Advisors can be a great source of knowledge when it comes to eInvoicing – after all, many of us are big advocates as it makes our job easier. I’d also recommend talking to your small business peers. If we can get the word out there, we’ll see more registrations which means more people will benefit!

Gabrielle: Ultimately, eInvoicing reduces stress. We all have busy lives, and no one needs more to do. So be sure to register now and thank yourself later.

Considering eInvoicing for your business? Head to Xero Central for a step-by-step guide on how to register in Xero in just a few clicks. And remember, your Allan Hall Xero Certified Advisors are available to answer any additional questions.

CONTACT ALLAN HALL

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Xero STP Phase 2 leave transition

Xero STP Phase 2 rollout

Posted on | by Allan Hall

Everything to know (and do) for the final stage of Xero’s STP Phase 2 rollout

By now, most business owners are probably familiar with Xero’s approach to getting payroll data ready for Single Touch Payroll Phase 2.

This will see businesses build on their existing STP reporting to share more information with the ATO and other government agencies each time employers process a pay run. And the good news is, Xero now arriving at stage three – the final stage of their transition to STP Phase 2.

Xero’s STP Phase 2 reporting deferral deadline is now 31 March 2023 meaning Xero Payroll users will have until the New Year to activate STP Phase 2. However, you can get your data ready today. In fact, it is recommended that you complete each stage sequentially as they are made available in Xero Payroll.

The three stages of transitioning to STP Phase 2 in Xero

Stage one – Delivered in August: The first part of this process is transitioning your existing employee profiles to be STP Phase 2 compliant. This stage also includes providing additional information when onboarding new employees to Xero Payroll.

Stage two – Delivered in September: You’ll need to identify and update certain pay items with the new earnings categories defined by the ATO for STP Phase 2 reporting.

Stage three – Rolling out from late October: This is the final stage in the STP Phase 2 transition which will break down paid leave into additional subcategories. We’ll support you with a guided experience in payroll so you can easily update existing paid leave types to meet the new ATO reporting requirements.

So you’re ahead of the deadline, it’s best to transition your payroll data as soon as possible. Head over to the STP 2 Portal in Xero Payroll to progress through each stage.

Stage three involves the introduction of new paid leave categories

STP Phase 2 introduces a set of new ATO reporting categories for use in your leave pay items. You will need to categorise any existing paid leave types you have set up in Xero Payroll. The categories available include:

Other paid leave (Type O)

  • Annual leave
  • Compassionate and bereavement leave
  • Family and domestic violence leave
  • Long service leave
  • Personal (sick/carer’s) leave
  • Rostered day off
  • Special paid leave
  • Study leave
  • Time off in lieu

Ancillary and defence leave (Type A)

  • Community service leave
  • Defence reserve leave
  • Jury duty leave

When these types of leave payments are correctly categorised in STP filing, the data can be more easily shared across government departments (like Services Australia). Learn more about the process of updating leave categories in Xero Payroll here:

Xero will be launching the leave pay item transition tool to help you with this final stage and has built a transition tool to assist you with easily categorising your existing leave pay items to meet STP Phase 2 reporting requirements. Xero has also been rolling out changes to Xero Payroll in preparation for STP Phase 2. As a result, it’s likely that some leave pay items may already have the correct reporting category assigned.

What Xero Users need to do now

Head to the STP 2 Portal in Xero Payroll and progress through each stage of the transition process to get your payroll data ready for Phase 2 reporting.

  • Stage one: Updating employee records to meet the new STP Phase 2 filing requirements.
  • Stage two: Updating income pay items to the new STP Phase 2 filing requirements.
  • Stage three: Categorising your existing paid leave types to the new filing requirements.

It’s important to mark each stage as complete in the STP 2 Portal before moving forward. This ensures your payroll data is accurate and could help reduce filing errors later in the financial year. Once you’ve completed all three stages, your business will be ready to switch to STP 2 later in the financial year.

Xero will be ready to report your updated payroll data to the ATO by mid-December 2022. While there is a deferral until 31 March 2022, we strongly recommend that you get your data ready for the transition as early as possible. If you’re unsure about updating your payroll data for STP Phase 2, contact our Bookkeeping team on 02 9981 2300.

CONTACT ALLAN HALL

using xero on an iphone

Changes to multi-factor authentication coming for Xero customers

Posted on | by Allan Hall

Over the last few years, our lives – and businesses across the world – have moved online at a rapid pace.

Unfortunately, cybercriminals have followed and are using new, digital methods to target Australians. As custodians of your data, Xero does all they can to protect the information held in your account.

One of the ways is through multi-factor authentication (MFA), a process designed to secure how you log in to Xero and verify it’s really you. An upcoming Australian Tax Office (ATO) update to MFA regulations means anyone that accesses an Australian organisation globally needs to re-authenticate their device every 24 hours when logging in to Xero.

What’s changing with MFA?

Many of Xero’s Australian customers would have started using MFA back in 2018 when it was first introduced by the ATO. Throughout 2021, Xero rolled out mandatory MFA for users in all other countries. Today, every Xero customer must use MFA when they log in.

Recently, in response to growing cybersecurity threats, the ATO updated its regulations around MFA for software providers like Xero. This means that the length of time a device is trusted for must be limited to 24 hours for cloud-based business applications, such as Xero. 

From early October, ‘remember me on this device’ will change. Currently, you can skip authentication for 30 days when signing in to Xero via MFA (such as through the Xero Verify, Google Authenticator or Authy apps), which remembers the unique device you’ve logged in with. With this update, you will need to re-authenticate your trusted device (such as a laptop, tablet or phone) every 24 hours.

When will this happen?

The 24 hour change to Xero’s MFA trust device frequency will start from early-October. From then, you’ll need to authenticate daily when you log in to your account.

Why is this being changed for Australian customers?

This is a regulatory change from the ATO and is to support cybersecurity measures to protect users’ valuable data – just think of all the critical information stored within your Xero account. It’s important to keep this safe.

You’ll likely remember when MFA was first mandated by the ATO. Just like last time, Xero is updating its platform to comply with this change and make it a smooth transition.

What if I’m in another country, like New Zealand, but access an Australian organisation in Xero?

This change doesn’t just apply to Australia but to anyone globally that accesses an Australian organisation – even if it’s just one account in Australia that you log in to. This is because you are accessing information (including personally identifiable information) that falls under the ATO’s remit.

Do I need to make any updates myself?

No – rest assured that the Xero platform will update automatically in early October. Since all Australian customers already use MFA, you won’t have to change anything about how you log in to Xero – except for daily authentication. This means you can continue to use your usual verification tool, whether it’s Xero Verify or a third-party app like Google Authenticator.

Why is cybersecurity so important and should I be worried?

Security has always been important at Xero and we want to keep your valuable business data safe. Since the start of the pandemic, activity by cybercriminals has been on the rise in Australia. As our lives have moved more and more online, so too have the approaches of cyber criminals.

They’ve continued to evolve and use increasingly sophisticated ways to entrap victims online. One of the most common types of cybercrime is phishing, which tricks you into clicking on a fraudulent email, text message or web link to then access your online accounts and steal your personal and business information.

How does MFA help protect me against cybersecurity threats?

MFA is one of many important tools used to safeguard against cybersecurity threats. It’s a security process which uses at least two different factors, something you know (your password) and something you have (mobile device), before you can enter your account.

This second layer of security is designed to prevent anyone else from accessing your account, even if they know your password. In fact, research shows that MFA can prevent up to 80% of data breaches.

What does this mean for Xero’s mobile apps?

Xero’s suite of mobile apps, such as the Xero Accounting App, Xero Expenses and Xero Projects, will also be impacted by these new regulations. When the new versions are introduced, you will no longer be able to choose the lock device option ‘Don’t lock it’. You will either need to use a security code, which will be available on Android for the first time and is currently available on iOS, or use Face ID.

What if I normally share my login with members of my team?

Shared logins reduce the security of your Xero account. The more people who have access to a login, the more likely it is to be compromised. Everyone who accesses an organisation in Xero should have their own login details (as per Xero’s terms and conditions).

If they don’t already, now is the time to make sure everyone is set up with what they need to securely use Xero. 

Read more about MFA here and troubleshoot any possible issues here »

CONTACT ALLAN HALL

July

Superannuation Guarantee changes

Posted on | by Allan Hall

Is your system updated for the latest SG changes?

From July 2022, the $450-per-month super guarantee (SG) eligibility threshold was removed.

This means that if an employee meets the other SG eligibility requirements, you must pay them SG, regardless of how much they earn. However, employees under 18 must still work more than 30 hours in a week to be eligible.

It’s important to make sure your payroll and accounting systems have been updated for salary and wages paid from 1 July 2022. This will ensure you correctly calculate your employee’s SG entitlement.

An employee’s eligibility for SG is determined when they are paid, not when they earn the income.

This means if you pay an eligible employee on or after 1 July 2022, you need to pay their super regardless of how much they have earned – even if all or part of the relevant pay period is before 1 July.

The ATO’s Superannuation guarantee eligibility decision tool can help you determine if your employees, including any contractors treated as employees for super purposes, are eligible for super.

You can also check out the Super guarantee contributions calculator to help you work out how much super you need to pay.

CONTACT ALLAN HALL

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Single Touch Payroll Phase 2

Posted on | by Allan Hall

What every small business needs to know

Single Touch Payroll (STP) Phase 2 means every business that employs staff will be required to get on board with the expanded program.

STP Phase 2 requires additional information to be reported to the ATO, enabling other government agencies to leverage the STP infrastructure to receive information and support the administration of the social security system.

Single Touch Payroll Phase 2 in a nutshell

With STP Phase 2 reporting live from 1 January 2022, there’s expanded capturing and sharing of payroll and employee data as compared to the original rollout of Phase 1.

This extended capturing by the ATO is shared more widely with relevant government bodies – such as social services – and fills certain gaps in payroll information sharing that wasn’t previously being transmitted. This new data remit remains an automated process, handled through STP-compliant payroll software such as cloud accounting apps and payroll systems.

What the new is data being shared?

The ATO is looking to patch knowledge gaps in the payroll submission process to support social security purposes and get a better understanding of employee payment details.

So, in addition to the payroll and employee information you’re already sharing through STP Phase 1 (salaries, PAYG, superannuation), Phase 2 involves capturing the following pay items, employee records and new fields:

  • employment basis
  • paid leave
  • allowances
  • overtime
  • cessation details and termination reasons
  • child support deductions
  • salary sacrifice
  • lump sum payments
  • country codes

Under STP phase 2 reporting employers are also required to separately itemise the components which make up the gross earnings amount by reporting all allowances separately, not just expense allowances that may have been deductible on an employee’s individual income tax return.

Digital Service Providers (DSPs)

STP Phase 2 requires employers to fill out employees’ payroll data correctly in your chosen software solution. Be sure to use a DSP that can roll out compliance updates to their software.

Updates to STP will be made by DSPs on users’ behalf and they are working with the ATO to ensure timely and competent compliance and delivery. Employers are already filling out this payroll information, so there are no new fields to capture on your end. In this sense and the automated nature of STP, employers are not required to do anything further than what is already being done under Phase 1.

What it will do is decrease the compliance burden upon businesses in terms of reporting. For example, under Phase 2 employers are no longer required to submit TFN declaration forms.

What will not be changing

The rollout of STP Phase 2 following does not change:

  • the way Single Touch Payroll is reported
  • Single Touch Payroll reporting dates (on or before payday)
  • the types of employee payments required for Single Touch Payroll reporting
  • employers’ current tax and super obligations
  • end of year finalisation requirements and submission responsibilities

The next stage of the Single Touch Payroll (STP) journey is underway

STP Phase 2 will see businesses build on their existing payroll reporting to share more information each pay run.

Most employers are now reporting through STP. You will need to start reporting if you have not yet transitioned, unless you have an exemption or a deferral.

What do business owners need to do?

If you’re currently STP compliant with payroll software that’s enabled, you should be running your payroll as usual. If you’re a Xero or MYOB user, your DSP will confirm when your solution is ready for STP Phase 2 reporting.

If you have any queries or concerns over your payroll solution or if you need reassurance, please consult your Allan Hall bookkeeper or accountant.

CONTACT ALLAN HALL

Related reading

Expansion of STP (Phase 2)
HomeBuilder Package

Be your best tradie with the right tech

Posted on | by Allan Hall

How can tradespeople go about streamlining their business and help set themselves up for success?

Reduce admin with the right tech

For trade business owners wanting to get more control and grow their business, reducing time spent on admin can have a huge impact. 

Worldwide, 39% of tradespeople spend more than 12 hours per week on paperwork – that’s more than one working week every month. Using specialised trade business management software can drastically reduce this.

For example, one area that’s a time blackhole for tradespeople is quoting. A fast and efficient quoting system not only saves admin time, but can also have a positive impact on how many jobs a tradesperson is likely to win.

Managing staff and communicating with customers is another area where the right software can come to the rescue for tradespeople. It’s easy to see how this time can add up if operators are spending a lot of the time on the phone, booking jobs, giving customers updates and liaising with staff.

Whereas using a cloud-based job management app like Tradify can ensure that your staff know exactly what they need, where to go and what to do just by checking the app. The Tradify app also features live job-tracking which can help communicate to each customer exactly what’s happening.

Using software to set up efficient admin processes builds a solid foundation for a trades business.

The amount of time saved compounds over time, potentially saving hundreds of hours a year. And the flow-on effects can be huge. Not only does it mean time saved, it can also help tradespeople feel less stressed, more in control and give them time back to spend on higher value activities, helping their trade business grow as a result.

We know that better efficiency gets you more family time and the ability to take the time off you want to have!

Got a question about making the most of technology in your trade business? Get in touch with our Bookkeeping team who will be able to assist you with all your cloud bookkeeping queries on 02 9981 2300.

Allan Hall Business Advisers are Platinum Xero Partners.

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