Tips for service-based businesses

1. A service business serves its customers by selling their time, skills and knowledge to achieve a result. Examples include accountants, lawyers and financial advisers.
2. Business owners can attract more customers to the business by:
   • Knowing the services they provide well, so they can attend to all customer queries;
     
   • Having success stories, testimonials and examples ready to share with the potential customers; and
     
   • Knowing their point of difference or unique selling point that sets them apart from their competitors and using this knowledge advantageously when marketing the business.
     
3. To have an effective pricing strategy, it is important that a business:
   • Research its competitors and similar businesses;
     
   • Review all business costs; and
     
   • Consider how its own pricing may influence who its potential customers are.
     
4. For more information, click here.

Claiming home office expenses

The type of home office expenses taxpayers are eligible to claim as a tax deduction will depend on the primary use of the home office.

Where the home office is the sole location for conducting a business, taxpayers can claim occupancy costs, such as rates, mortgage interest, rent and insurance together with running costs, apportioned depending on business use.

Where a home office is used for work-related purposes and the taxpayer has a main office elsewhere but chooses to work from home, taxpayers can only claim running costs.

When claiming running costs, taxpayers can choose to claim on the basis of apportioning actual expenditure or use the Tax Office fixed rate of 45 cents per hour.

The Tax Office rate covers costs including decline in value of computers and other assets, electricity, internet and phone rental costs.

Taxpayers need to keep a diary over a 4 week period demonstrating the average time spent using the home office for business purposes.

The 45 cents rate for home office expenses applies from July 1, 2014, which is up from 34 cents.

For more information, click here.

Discussion open to employers regarding the new payroll reporting procedure

Single Touch Payroll is a new reporting system where employers are required to electronically report payroll and superannuation information to the Tax Office when employees are paid, using Standard Business Reporting-enabled software.

Single Touch Payroll will be available from July 2016 to streamline the employers’ reporting obligations by:

• Providing a digital channel to simplify the process of completing tax file number declarations and Super Choice forms;
• Notifying superannuation funds and government agencies, such as Centrelink, when an employee ceases employment; and
• Eliminating the need to report employees’ PAYG withholding through activity statements and payment summaries.

Employers may be required to use or acquire appropriate payroll software in order to comply with Single Touch Payroll.

The Tax Office is asking employers and other stakeholders to provide comment on:

• Transition arrangements;
• Suggestions on how to minimise implementation and compliance costs; and
• The potential for employers to remit employee PAYG withholding and the superannuation guarantee at the same time employees are paid.

For more information, click here.

Deducting amounts from employees' pay

Taking money out of an employee’s pay is called a deduction.

An employer is allowed to deduct money from an employee’s pay only if:

• The employee agrees in writing and it is principally for their benefit;
• The deduction is allowed by law, a court order or the Fair Work Commission; or
• The deduction is allowed under the employee’s award or registered agreement

Money cannot be deducted from an employee’s pay if:

• The deduction benefits the employer directly or indirectly and is unreasonable in the circumstances; or
• The employee is under 18 years of age and their parent or guardian has not agreed in writing.

Employers cannot take money out of an employee’s pay to fix up an overpayment made as a result of a payroll error, unless the deduction is allowed under a registered agreement, award, legislation or court order.

Instead, the employer and employee should discuss and agree on a repayment arrangement.

If the employee agrees to repay the money, a written agreement must be made and specify:

• The reason for the overpayment;
• The amount of money overpaid;
• How repayments will be made by the employee; and
• The frequency of repayments.

If the repayment cannot be agreed on, an employer may need to seek legal advice.

For more information, click here.

Australian small business and family enterprise ombudsman

The Government has committed itself to transform the Australian Small Business Commissioner into the Australian Small Business and Family Enterprise Ombudsman.

This proposed change has been released to the public for consultation.

The Ombudsman functions and powers will include:
• Commonwealth-wide advocate for small business and family enterprises;
• Concierge for dispute resolutions; and
• Contributor to the development of small business friendly Commonwealth laws and regulations

Interested parties can submit their comments on the exposure draft legislation by no later than Tuesday, 7 April 2015.

Submissions can be made either by post or electronically.

For more information, click here.

Deductible Home Office Expenses

Claiming running expenses and occupancy expenses depends on whether or not a taxpayer’s home is their place of business and if they have an area set aside exclusively for business activities.

If the taxpayer’s home is their main place of business and an area has been exclusively set aside for business activities, they may be able to claim both running and occupancy expenses.

Where a room of a home is used for business activities but the taxpayer has another permanent assigned office available elsewhere, the taxpayer may only be able to claim running expenses.

It is important to keep a diary or similar record keeping document to record any running and/or occupancy expenses being claimed for about a four week period each income year for substantiation.

Alternatively, the taxpayer may choose to claim certain expenses using the fixed rate provided by the Tax Office for that particular income year.

The Tax Office has provided a table to determine the type of home office expenses that may be claimed based on how the business is operated from home. Click here for the table.

To assist in determining your entitlement to occupancy expenses and estimated deductions, the Tax Office has made available a calculator. Click here to access the calculator.

For more information, click here.

GST treatment of selling a business as a going concern

Generally, the sale of a business is a taxable supply and subject to GST.
However, if the sale is a supply of a going concern, it is treated as a GST free supply.

As a result, the seller does not have to charge 10% GST on top of the selling price.

The sale of a business as a going concern is GST free if all of the following apply:

• The sale includes all things necessary for the business to continue operating, such as inventory and equipment; 
• The business is carried on up until the day of sale;
• The sale is for a consideration;
• The purchaser is registered, or required to be registered for GST; 
• Before the sale, the seller and the purchaser have agreed in writing that the supply is of a going concern

Stamp duty can be minimised on the sale of a business as a going concern because it is calculated based on the gross selling price, inclusive of GST.
For more information, click here.