November 21, 2023 • 44 mins
ABNs, taxes, bank accounts, it's the very unsexy side of setting up a business, however do it right the first time, and your future self will thank you! V and Jess outline how to register business, which one is right for you, and how to make tax time easy!
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Episode Transcript
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Speaker 1 (00:00):
Hello.
Speaker 2 (00:01):
My name is Santasha Nabananga Bamblet. I'm a proud your
the Order KERNI Whoalbury and a waddery woman. I would
like to acknowledge the traditional custodians of the land of
which this podcast is recorded on a wondery country, acknowledging
the elders, the ancestors and the next generation coming through
as this podcast is about connecting, empowering, knowledge sharing and
(00:24):
the storytelling of you to make a difference for today
and lasting impactful tomorrow.
Speaker 1 (00:30):
Let's get into it. Hello and welcome back to the
Business Bible. I am Victoria Devine, the owner of several
(00:51):
successful businesses.
Speaker 3 (00:52):
It's not going to get less weird saying that, is it?
Speaker 1 (00:55):
And I am joined by one of the hardest working
side hustlers. I know, miss that's greatch Ah, how kind,
very exciting, nice lady.
Speaker 3 (01:04):
You're a very nice lady, pumped it into episode two
of the Business Bible.
Speaker 1 (01:08):
I am also very excited because today is arguably one
of these sexiest topics. Jessica, we could talk about we're
gonna set up your small business books.
Speaker 3 (01:17):
Jessica, I feel like you're using the term sexy very loosely.
Speaker 4 (01:21):
Right.
Speaker 3 (01:21):
Oh no, no, I.
Speaker 1 (01:22):
Think it's really sexy today we are talking tax we're
talking avns and bank accounts.
Speaker 3 (01:29):
Was that sexy talk? Don't it to me? Tell me more?
Speaker 1 (01:31):
In all seriousness, though, Jesse, this is the one thing
that I have on and on and on to people
saying I'm going to start a small business or I've
got a small business, Please set up your books properly
from the very beginning to ensure that everything runs smoothly
and we don't get into any trouble with the ATO,
because there is honestly nothing less sexy than having the
ATO knocking on your door, right, Like it's the one
(01:53):
thing that I just go, No, just go and get
another bank account, Just go and set it up separately,
get an ABN. Stop underestimating the power of your business,
Like yeah, you would hear it all the time where
people are like, oh no, I can't be bothered, Like
I don't do that much work, Like you could just
be an influencer on the side, you know, making a
couple of hundred dollars or you could you know, have
(02:14):
like and I always use a candle business because I
kind of like feel like that's scalable. It could be
as big as glass house or like a coyer or something,
or it could just be something that you like spend
sundays like pouring candles because you really like it and
sell them to friends and family. Yeah, but it's one
of those businesses where you might go it's not worth it. No,
it is worth it. And the second you say it's
not worth it, you're not believing in your business. And
(02:35):
so having set up books is going to be the
stable foundation of making sure that your business is successful, which, Jessica,
is very sexy.
Speaker 3 (02:44):
That does sound very sexy to me. I think it's
probably really confusing to a lot of people, which is
why they don't often do it properly. But as someone
who has kind of been through it, I think there
is nothing worse than getting to tax time and being like,
oh my god, everything's everywhere. So if you set it
up now, saving yourself all of that stress in six
or twelve months time, and you too will agree that
it is very sexy.
Speaker 1 (03:06):
Rois I promise, And it can be super complicated, right,
So we'll try and make it as easy and clean
as possible today, starting with getting an ABN. Jessica, you
have one. I do a big dog and ABN is
what is called an Australian business number, which is a
unique number that identifies your business to the government and
(03:26):
also to your consumers. It's absolutely necessary for tax purposes,
for invoicing and at times for your banking. Okay.
Speaker 3 (03:34):
I have an ABM because I got one as a kid,
because I modeled for Target once.
Speaker 1 (03:39):
Target.
Speaker 3 (03:40):
Yeah, I was in a big post and my mum
tried to take it home. They wouldn't let it. So
I actually wouldn't let it. Mere, who is this crazy woman?
Please get act out of the kid section.
Speaker 1 (03:51):
That's very fair.
Speaker 3 (03:52):
But I had one set up and I think I
just had to renew it. I didn't actually start from scratch,
So tell me a little bit more, okay.
Speaker 1 (03:57):
So it is really important because when we actually talk
about an ABN, and it's not as simple as just
like trotting down the road and picking up your ABN.
I mean, it is that simple online you just apply
for it, but there are actually several different options when
signing up for an ABN, and I feel like lots
of people get analysis paralysis. So let's go through the
three main types today. So the first is not having
(04:18):
an abn at all, So no, by no, this is
when you choose not to register your business with the government,
and this is only for small businesses that turn over
less than seventy five thousand dollars per financial year, so
it means that you're kind of functioning under your personal
name completely. It's perfect for side hustles or if you
want to make a bit of money on the side
and you aren't expecting the business to grow, and you
(04:39):
don't really want it to grow. You're just like, oh,
I did some gardening, and you know, one year, I
just was like trying to smash down debts, and so
I offered my gardening services for you know, the period
over Christmas, and I'll never do it again. But I
did accept business income, and obviously I wanted to make
sure that that was all clean and I paid tax
on it and stuff. So that could be a good example.
(05:00):
I also be, as I said before, a mini influencer
doing a few brand deals here or there.
Speaker 3 (05:04):
Or maybe you're like.
Speaker 1 (05:05):
Side hustling as much as Jess does, and you're renting
your clothes out on the side, so you might have
like a few dresses listed on the vault or something
that is not a hobby. That is actually something that
you need to pay tax on it. And I think
there are a lot of people who are quite flexible
about tax. I'm not one of those people because I'm
kind of like, do it right, do it once, don't
(05:26):
get in trouble, full stop, end of story. Whereas I
have heard historically people go, oh, well, it could fall
under being a hobby if you're earning less than five
thousand dollars a year from it. And I look at
that and I just go, yeah, but like, you're trying
to generate additional income. It's not like I just sold
a chest of draws on Facebook marketplace once off, Like
you fully set up this business structure online to generate
(05:51):
income from your wardrobe. Yeah, And so like I'm a
little bit more cut and dry, and I go, no,
you definitely need to be doing tax on that. But
the important thing there is talk to your accountant if
you're worried, because obviously I can't give you personal advice,
but essentially, you could just be selling some goods that
you create yourself, knowing that it's just never going to
exceed seventy five thousand dollars a year. So like it's
kind of, you know, the gateway to having an ABN.
Speaker 3 (06:14):
Yeah. Interesting addendum. If you're providing a service to somebody,
and I only know this because it happens to me once,
if you do not have an ADM, often the company
or the person paying you will behold the highest tax rate.
Like typically you would be taxed at your marginal tax rates.
So for example, if you were being taxed, it is
it twenty three twenty four?
Speaker 1 (06:36):
What's the thirty two and a half percent really tax rate?
I would like to swap it to twenty three.
Speaker 3 (06:41):
You've just like flipped.
Speaker 1 (06:43):
It's not wrong, just a little on the wrong side
of the tracks. Yeah, so I'd like to do that. Yeah,
if we could drop it, i'd me up to that.
Speaker 3 (06:50):
If you were earning under the threshold, your business income
would be taxed if you were trading at like that
same tax rate. But if you're supplying to somebody else,
they will often withhold the top rate of tax, so
it might be high, so you end up paying more
tax than you would that you had ab It come
a little bit complicated, but also good to know. Keeping
(07:12):
tip bit on the side because not having an ABN,
obviously you kind of go oh, well, I'm never gonna
make more than ten grand from.
Speaker 1 (07:18):
This little side hustle. However, it also leaves you open
legally to a lot of like impact, if that makes sense.
So you know, if something happens, just your butt's on
the line. Yeah, like it's you personally, and I just
go oh, like, if I'm starting to provide a product
or a service, like I want some level of protection.
(07:38):
And also I just like things to be quite clean.
Even if you don't have an ABN, I would still
be looking at having your own bank accounts and making
sure that your business income is separate from your personal income,
just to make things easy for you. So don't think
that you're going to get out of me giving you
a sexy banking structure just because you go no ABN,
no worries.
Speaker 3 (07:59):
Yes, no ABN, more worries, more worried, more worries. Tell
me about the next category, which is actually the one
that I fall into. Okay, So this is sole trader.
Speaker 1 (08:06):
So this is for a business of one person or
someone likely to pay for contractors or freelancers. So look
at the future of your business. Do you see it
just being you? Are you just always going to freelance.
This option is free, sexy, and can be done through
the ATO website and only through the ATO website, and
it can be done really quickly and easily. When you're
(08:27):
googling sets up ABN. Please do not click any of
the links that are like this proversion will help you.
Speaker 3 (08:34):
No, don't do it. It's really easy.
Speaker 1 (08:37):
It's really easy and it's free to do. Don't pay
some plub who's trying.
Speaker 3 (08:41):
To scare you. Really literally take advantage of you.
Speaker 1 (08:45):
Also on that every year, Yes, I get multiple of
these letters in the mail from people going your ABN's
up for renewable or something of the like. Reader, is
it from the ATO. If not, it's a random marketing
company who has searched your ABN on the ABN website.
My address is on there, like my business address, like
so that people can contact me. That's how business works.
Speaker 3 (09:07):
But they send a.
Speaker 1 (09:08):
Little marketing email that looks like an invoice and they go,
just you know, scam this QR code and pay us
and we'll get it all sorted out for you.
Speaker 3 (09:17):
That's awful.
Speaker 1 (09:18):
Yes, it is a trap.
Speaker 3 (09:19):
It is a scam. Oh my god.
Speaker 1 (09:21):
So we only talk one on one with the ATO.
There will never be a third party unless it is
your nominated third representative, which will probably be your accountant.
So if it is not coming directly from the ATO
and it is, you know, from another company, run yeah,
run because they're scary. But just you're a soul trader.
Why did you pick sole trader for your personal circumstances
(09:44):
and not just having no aben?
Speaker 3 (09:46):
Oh, I think it was kind of I was invoicing
companies and they were kind of going, where's your ABIEN, And.
Speaker 1 (09:52):
I was like, I don't have one for you to
put into your system, and sorry.
Speaker 3 (09:55):
You have a look And a lot of the time
companies do need them to set up like purchase orders
and things on their end, and that was and I
was like, oh, I need to renew the one. And
thankfully I had one that was existing.
Speaker 1 (10:03):
And that's just as easy to renew as it is
to set up. Honestly, you just need some identification. Yeah,
let the government know what the purpose of the business
is and hits amit, Like it's so easy.
Speaker 3 (10:12):
It was so easy, And I think it also made
me feel a little bit legitimate too.
Speaker 1 (10:15):
Like she's got an ABN on her invoice.
Speaker 3 (10:17):
Yeah, Like I felt like a proper person that was
actually trading goods and services. You know, I felt like
it just made me a little bit more legit, which
might be silly.
Speaker 1 (10:25):
But no, no, no, no, I think it's really important to
feel legit when you're doing your business as well. I
know it can be you know, a little bit fluffy
because people will go, well, you know, if one person
ends ten thousand dollars with no ABN, and you're saying
that having an ABN, I'm still just going to earn
the same amount doing the same thing, you might go, well,
what's the point. Yeah, the point can sometimes honestly be legitimacy.
(10:46):
As somebody who hires a lot of freelancers and soule
traders to do like, you know, random content. Sometimes sometimes
we'll do events. Yeah, I want you to have an
ABN because protects me. It means that I am, you know,
paying an invoice directly to an actual business that can be.
Speaker 3 (11:01):
Traced, everything's clean. Yeah, And so I prefer to work
that way.
Speaker 1 (11:05):
So often it could actually be the difference between you
being picked and another sole trader being picked. So I
think that it's important to just set it up to
make it as easy as possible. For your consumers and
your clients as well, because the less friction during that process, promise,
the more money will come in your door.
Speaker 3 (11:23):
Yeah, one hundred percent. There is a third.
Speaker 1 (11:25):
There is a third, and that's.
Speaker 3 (11:26):
What I have.
Speaker 1 (11:27):
I have a company set up, So a company is
a legal entity in its own right, unlike a soule trader.
So there's a bit of protection for you and your
personal assets, obviously having a business in between them, which
to me sexy because I didn't work this hard to
you know, have something happen in the future obviously, Like
I'm pretty open and honest about it. It's not like
(11:49):
I'm worried that something's going to happen. But I don't
really want my house to be at risk when I've
got a company, Like you know, if you're earning ten
thousand dollars from a side hustle, that to me is
quite different to my entire livelihood being at risk. And
like I'm responsible for a lot of people's incomes. Yeah,
so I just want that protected.
Speaker 3 (12:07):
The buffer.
Speaker 1 (12:07):
I'm sure Jess, you feel a lot more protected knowing
that there's a business structure there, there's something legit set up.
The only way to employ full time, part time or
casual stuff is to have a registered company, so you
can't just be a sole trader and hire someone. You
actually have to set up your entire business structure differently
to hire your first employee, which, if you're looking at it,
(12:28):
you know, in your circumstance, just I doubt you're ever
going to hire an employee because of the way that
you work and what your plans are. But like what
if you were like, oh, actually I want to take
content creation full time, Like I'm going to take this
really legit. One day, my personal income is going to
outweigh the amount of income that I make in my
full time job, and I'm going to quit. Yeah that's
(12:49):
exciting or happens when you quit, Jess, you might need
to hire a personal assistant. Oh you know, legit. If
you've taken this full time, you might want to expand
and have that support, so you need to think about
this could be the same. My favorite example the candle business. Yea,
it might be you pouring candles on a Sunday afternoon
because it's really therapeutic. One day you go viral and TikTok,
(13:12):
exciting money win, like such a business win. We'll talk
about going viral and TikTok and a whole episode one day.
But you go viral, everyone's placing candle orders.
Speaker 3 (13:21):
You've got two hands, You've only got two hands. How
do you pour all the candles? Exactly?
Speaker 1 (13:25):
It just gets very stressful, Jessica. So we need to
think about what could happen in the future. But it
is an investment, so it does cost between four hundred
and seventy four and five hundred and seventy six dollars
depending on the business that you are registering. And it
does come with a bit more responsibility in that you
need to do a bit more reporting, So you're likely
(13:47):
going to have to submit quarterly documentation to the ATO
about what's going on with your business, how much you've earnt,
how much tax you are anticipating to pay at tax time.
And something that I do with a lot of small
business owners do is pay what's called bas and bas
is essentially paying your tax in advance, because there is
(14:08):
nothing more stressful as business increases, right, even as business
doesn't increase, Like jess House, tax time as a small
business owner not very fun, right, But if you're paying
bas you're breaking up the tax that you're paying throughout
the year, and then tax time comes and my accountant
sits me down and we kind of do like an
audit of like what have you paid? What are things
(14:30):
that we could now claim, what are things that you
might have missed out on, and what are things that
you still have to pay for? And my tax time
like come June thirty, I look at it and I go, okay, well,
I'm not going to owe thousands and thousands of dollars.
You know, there's a bit of cleanup going there. So like,
bas it's a business activity statement if I didn't say
that before, but a bas is kind of like predicting
(14:52):
based on your past performance what your future tax will
be so that I don't end up in a sticky
situation where I have a heap of tax owing all
at one time.
Speaker 3 (15:01):
Yeah, and that's like all you can ask for, is that?
Speaker 1 (15:03):
Okay?
Speaker 3 (15:04):
So question Yes, If I'm currently assult trader and I've
picked s soul Trader because I think that's going to
work for me, I am just working by myself, doing
my thane, doing what you're doing now exactly right. What
happens if I do get to the point like you
said in a couple of years where maybe I do
leave my full time job and I do need somebody
to come on and help.
Speaker 1 (15:22):
Can I change? Of course you can, although it does
get a little bit difficult changing. So that's why I
always recommend people you know you go. It could be
four hundred and fifty bucks like to set up the
entity to begin with, why bother. Yeah, sometimes it's worth
spending the money on the structure to begin with if
that could even be a possibility, and if it doesn't
(15:44):
become a possibility, you just have more projections.
Speaker 3 (15:46):
That's not the end of the world. Please don't get
me wrong.
Speaker 1 (15:48):
I totally understand that it's a privilege to be able
to afford literally everything. As somebody who started their business
by making all their their graphic design or a Microsoft
office and screenshotting it go, I get it. But it
can be really difficult to change from a sole trader
ABN to a company ABN down the track. So I'd
really suggest just get it right the first time. But
(16:10):
it's not just the difficulty in the paperwork. It can
actually be costly to set it up and change it
because you're going from a business that you know as
a sole trader has value into another company and structuring
it actually can be a little bit more complex than
what it seems. So obviously you're going to want to
weigh up your decisions financially, time wise, and work out
(16:33):
which one is the right one for you, because obviously
moving to a company is expensive, not to overload you.
Moving to a company is expensive. But who then owns
the company, Jess? So it's not just going, oh, well,
maybe I'll own your company, Jess, that's not the question
I'm asking. So my personal structure, And this is why
I love the Business Bible because I can just tell
(16:55):
you what I do. I'm not saying that this is
the right thing for you, This is the right thing
for me. But I when I set up my companies
at the same time established a family trust. So my
family trust owns my businesses, not me. Personally, you personally
can own a company, but you need to maybe spend
the couple of one hundred dollars sitting down with an
(17:16):
accountant going well, if I'm going to set up this company,
what is the best way to protect me? What is
the best way to own this? Do I own it personally?
You can totally own it personally, that's fine, That's a
really simple structure, but your account and might turn around
and be like, well, actually, what are your plans for
the future. So one of the reasons why we made
this decision is because in the future, before my business
(17:38):
made any money, I was like, you know what I
would love for the structure. You know, it's kind of aspirational.
It gave me a lot of motivation as well. I'd
love to be able to buy an investment property, and
I would love to be able to put that investment
property in a trust so in the future I can
distribute the dividends of that investment property down to my
family members. Could I afford any investment Probably at that
(18:01):
point in time, no, Jessica.
Speaker 3 (18:02):
The answers no, because I was in debt when I
started my business. As I said, did you even have
one property at the time?
Speaker 2 (18:07):
No?
Speaker 1 (18:07):
Hype dream, hype dream. But we want to make sure
that we're setting ourselves up for success. And that's one
way to additionally protect yourself that you really should have
the conversation with an account and go, well what does
that mean for me? Like, you know, jess you might
be hiring your first assistant or content creator or whatever
you're doing, but what next, where does the ball roll? Yeah,
(18:28):
so I think it's important to understand.
Speaker 3 (18:30):
One hundred percent to switch gears. Ever so slightly, I
just want to go back a few steps because earlier
we were chatting about the seventy five thousand dollar threshold,
and so if you're earning less than seventy five thousand dollars,
you're all guccy. But what happens when you're earning more?
Because that's what we all want, right like, we want
to be earning heaps money.
Speaker 1 (18:47):
We're going to become so rich. We're going to be
rich af So as soon as your gross income hits
seventy five thousand dollars. Gross income is total earnings prior
to tax or deductions. So when you look at that number,
I think it's gross because that's what you could have
taken home but you had to pay tax.
Speaker 3 (19:05):
That's so fun. So and then net is what you
captured in the net.
Speaker 1 (19:08):
That's really big holes, Jessica. So you're not going to
forget that now, but you need to register and pay
what's called goods and services tax. I'm a finance girly
at heart. If you send me an invoice, jess and
you're not charging me EGST immediately, I know how much
your business turnover is true, I know you're earning less
than seventy five thousand dollars. Yeah, okay, so this is
(19:29):
again not personal advice. Do you know what I was
doing before I earned more than seventy five thousand dollars? Yes,
what I was still charging your GST. I was paying
GST because you can pay GST irrespective of what you earn.
Its choice up until seventy five thousand dollars. After seventy
five thousand dollars.
Speaker 3 (19:47):
It's compulsory.
Speaker 1 (19:49):
Before seventy five thousand dollars, they're like, you don't need
to do this, you could if you wanted to. Me
earning ten thousand dollars, I'm like, I want to because
do you know why? It's kind of like left pocket,
right pocket. I'm charging you just ten percent GST gets
added to your invoice. I put that ten percent to
the side, and I just pay it to the government.
So I'm not losing money by charging GST. But I
(20:09):
knew that by sending out an invoice that charged GST,
people would immediately go, oh, she's done this before. Yeah,
she's just been earning a fair bit.
Speaker 3 (20:17):
It's that professionalism thing again, a little bit sneaky.
Speaker 1 (20:20):
Should you do it? I don't know you do, you Booth,
but I did and it made me feel powerful.
Speaker 3 (20:25):
Af I love that for you.
Speaker 1 (20:26):
So GST is essentially an added ten percent of the
product or service that you are selling, which has to
be paid to the tax office. It's not your money,
as I said before, it's left pocket, right pocket, Like,
it's not going to cost your business more unless you
somehow have not a clean banking system and you forget
about the ten percent and then you allocate it to
something else, and then come tax time they're like, hey,
(20:48):
by the way, you've got to pay your GST and
you're like, wait what.
Speaker 3 (20:51):
I don't have that money right now.
Speaker 1 (20:52):
Yeah, which is why we want clean banking systems, Jessica.
But it has to be paid, and you can't just
be having no ABN. Must have an ABN at this stage.
So the second you get over seventy five thousand dollars,
if you had no ABN, baby, it's time to get
an ABN. Like it's non negotiable at that point because
the ATO looks at it and goes, this is pretty legit,
Like seventy five thousand dollars is a lot of money
(21:14):
that we've let you earn. So once you hit seventy
five thousand dollars, your job in business now has two rules.
First running the business and second collecting tax.
Speaker 3 (21:23):
For the tax office. Our tax man's sounding pretty happy
about that. He's a nice guy, I promise. What does
happen if we are maybe not keeping a close enough
eye on our bank accounts, maybe we haven't structured it
in the best way. Definitely not speaking for experience, but
what happens if you miss the seventy five thousand dollars
milestone and you are late to register for.
Speaker 1 (21:43):
GST, Probably gonna have a meltdown, yeap first, probably gonna
just be a little bit anxious, a little bit stressy.
Speaker 3 (21:49):
We're not gonna let that be an option.
Speaker 1 (21:51):
I would register for GST when setting up my ABN,
just being real clean from the very start, to be
honest for a few good reasons. So obviously, as I
said before, once you start charging GST, that's going to
be an extra ten percent for your clients or customers
to pay. And if you start prices including that ten percent,
you don't have to re talk to your clients Jess. True,
(22:13):
So like you get this seventy five thousand dollars, you're partying.
You've probably gone out with your part or your friends
have some champagne. Like, look at my business, I'm killing it.
Now you have to go to your clients and be like,
by the way prices are increasing ten percent, you don't
get more. Actually, I just have to start collecting money
for the ATO.
Speaker 3 (22:29):
I didn't think of.
Speaker 1 (22:30):
Your client's not gonna love that, not because they're not
happy for you, but like, no one wants to pay
more money, Jess. So if you just did it from
the start, there aren't any price hikes once you suddenly
become qualified to pay for that. Yeah, And I like that, Yeah,
because I like being paid for your worth. I mean,
if we're asking for a ten percent pay rise, it's
gonna be for you, Jess, not for the ATO.
Speaker 2 (22:51):
Right.
Speaker 1 (22:51):
The second thing is, again makes your business look more
legit when you charge for GST and when you don't,
it's very clear that you're making less than seventy five
thousand dollars. I mean maybe not everyone looks at it
the same way I do, but I definitely you're extra nosy.
And if you're working for any other big businesses. I
don't mean to be rude here, but like, let's say
your freelancer, let's say you're just GRICI right, you are Jessica,
(23:14):
and you make content, beautiful content that for other brands,
they see all of the influences in voices. Yeah, so
if one's coming through with GST and one's not coming
through with JST, if you're new in PR, you might go, oh,
we just got her invoice for jess she didn't charge GST.
Speaker 3 (23:30):
What's that mean.
Speaker 1 (23:31):
They're gonna ask.
Speaker 3 (23:31):
If they're gonna know, everyone's going to know. Yeah.
Speaker 1 (23:34):
And I'm not saying that that's shameful. No, Like it's
not a bad thing at all, but you need to
understand if that's something you want considered or not. And
then three, it's done well ahead of time, so you
don't actually have to worry about accidentally missing it or
paying in arrears or you know, upsetting the tax office,
which is my favorite thing not to do.
Speaker 3 (23:52):
Yeah, I hard agree from me there. I think set
it up early. I think that's the premise of this
whole episode, really, isn't it, Like, let's get your ducks
in her own new so that nobody's having a meltdown exactly.
Speaker 1 (24:02):
We don't have meltdowns. And getting your ducks in a
row is not just smart when it comes to I
guess business and getting the structure right. It's also so
essential from my perspective, because it means that you believe
in your business. So if you're just like, oh no,
just do it through my personal account, it's not worth
it. It's not going to grow be like sorry, that's not
the mentality that we have when we're starting our own
(24:22):
small business. We don't need to take over the world
with our small businesses. Like our small businesses could just
be that extra ten k year so you get a
bougie family holiday once a year, and like that's why
we're doing it. But we are proud of that. We
actually believe in that, and we you know, have conviction
in that because ten grand this year might be twelve
grand next year, and like things just creep up and
(24:44):
that's great.
Speaker 3 (24:44):
But the structure is what's.
Speaker 1 (24:46):
Going to crucify you if you don't get it wrong,
and that's where most people do go wrong. Yeah, for sure.
Speaker 3 (24:52):
All right, we've given you a lot to think about
talking about GST and ABNS and all of those different options,
so we not let that marinate in your brain from
a little marinate away, and then we're going to head
to a quick break, and when we come back, we're
going to talk about claiming and tax in small business.
Speaker 1 (25:07):
I love these episodes so much. Don't go anywhere.
Speaker 3 (25:20):
Welcome back, everybody. We've gone over how to set up
your business, get it ready for tax time, and now
I want to talk about what actually does happen at
tax time because it seems like very my birthday, that's
very true, Jin.
Speaker 1 (25:30):
Thirty good time to work in finance.
Speaker 3 (25:34):
I know, it's amazing. Is tax time a little bit
different if you're registered as a sole trader versus as
a company.
Speaker 1 (25:40):
Yeah, so it's a good question, and they are actually
very different to one another, which might help you decide
whether to register as a sole trader or as a business.
So sit down, I've written a list, right, are you ready?
I'm ready. As a sole trader, your profits will be
included on your individual tax return, so you will be
paying tax at your personal marginal.
Speaker 3 (26:00):
Tax rate, which so what we're talking about before.
Speaker 1 (26:02):
Yeah, so obviously that thirty two and a half percent
is just standard, but it goes up much higher, and
maybe you're in a situation where you're like, oh, well,
actually another you know, ten grand actually pushes me over
a threshold. We need to think about that. It's an
extension of you and your personal financial affairs, and it
actually makes tax time really easy. So like back on
(26:23):
the flip side, me trying to do a jump scare.
Most like, it's really easy to do your tax when
it comes to being a sole trader. If you're registered
as a business, you will have to do the tax
for your business and your own finances because they're not
bundled together like a sole trader, and that is not
only more complex, but can be a little bit more costly.
(26:43):
So you might be paying I don't know, Jess, what
do you pay for your tax return each year? Maybe
like two hundred and fifty bucks.
Speaker 3 (26:48):
Nowadays around then, it's pretty standard.
Speaker 1 (26:51):
You'll be paying maybe four or five hundred dollars for
a tax return done for your business in addition to
your individual tax return. So just keep that in mind. Yep,
big businesses pay thirty percent tax rate on profits.
Speaker 2 (27:04):
Jess.
Speaker 1 (27:04):
Oh, just flat, just flat there, you go, very very sexy.
Profit means the money you've made after pay deductions, et cetera.
Not just the gross income that you look at that
you go, well, that's gross. I could have made that.
So it's not you know, if you had ten thousand
dollars coming in the door as a business, they don't
(27:24):
go all right, well you are thirty percent of that.
And this is why tax time can be a little
bit complicated because you go through that and go, okay,
well I paid, Jessica, I also you know, paid rent
for my facility. I also had these printing costs for
my business. And you have all these costs the deduction
that are deductions, and then at the end of that
is your profit and that's what you pay tax on.
Speaker 3 (27:45):
Okay, that's pretty good.
Speaker 1 (27:46):
So look it's pretty good. But as we said, big
business pays thirty percent. You go, that's pretty sexy, jess
because obviously the average marginal tax rate is thirty two
and a half cents. It's two and a half percent
better off.
Speaker 3 (27:58):
It's pretty good to make.
Speaker 1 (27:59):
Just do it some basic maths, not advice again, small
business tax jess reduced twenty five percent.
Speaker 3 (28:06):
Okay, so we're getting closer to that prostage you made.
It's much closer. That's pretty good, much.
Speaker 1 (28:12):
More palatable throughout the year. You're obviously, as I said
at the first half of this episode, you're going to
be required to complete what's called a business activity statement
or a MASS as you call it in the industry,
which is quarterly. And I've written down it can help
it tax time, it doesn't. It definitely does help it
tax time, not can it does? It makes me feel
so on top of it. Yeah, I don't like having
(28:33):
to talk about tax quarterly, but I promise everything is
easier when it's broken down into smaller chunks. Yeah, So
it kind of becomes a little bit sexier when you
start talking about the cash rate, right, Jessica, because you
know small business is tax at a reduced rate of
twenty five percent. You go, hold on, so twenty five percent.
What if I was, you know, earning this seventy thousand
dollars in addition to my normal income, and I've had
(28:56):
a really good tax here that it would actually push
you as an inn individual, like if you're working as
a sole trader, it is included on your individual tax return,
which might push you to the highest marginal tax rate
in Australia is forty five percent tax. Yes, and that
means you would earn over one hundred and eighty thousand dollars,
which if you are an individual who has a PAYG
(29:18):
job and a side hustle, it's not that hard to
get to that number.
Speaker 3 (29:21):
Yeah, totally plausible.
Speaker 1 (29:22):
Totally plausible. Like we're not talking about pipe dreams and
oh my gosh, I wonder like one hundred and eighty thousand.
Speaker 3 (29:26):
Dollars for a PAYG job. You go, wow, that's a
lot of money.
Speaker 1 (29:29):
Yeah, but if you're doing two jobs at one time,
you kind of go, all right, well, I might earn
you one hundred and ten one hundred and twenty in
my normal job, and then I might, you know, earn
another seventy.
Speaker 3 (29:38):
Well, now you're at the highest marginal tax rate forty
five thousand we need, yeah, forty five percent.
Speaker 1 (29:43):
Yeah, you're not on tax, you're on practical advice. I'll
be on the math side of things, right, So to
keep it that way, but I think it's really important
to I guess look at that because twenty five percent
bit sexier than forty five percent. Yeah. There's also obviously
going to be things about distributing that income, so we'll
talk about that later. But they are very different.
Speaker 3 (30:04):
Okay, before the breaker gave the example of someone who's
looking at the sole trader model, but they could maybe
decide to go the other way and go for a
business instead. Are there any advantages around tax time to
eat the model that may help people decide which category
would be the best option for them.
Speaker 1 (30:20):
So the answer is yes. First thing first, as a
sole trader, tax is just easier and faster to do.
It's the same way you've been doing tax always. It's
just another line item, pop it in and it spits
it out.
Speaker 3 (30:30):
It's very straightforward.
Speaker 1 (30:31):
The ATO now has their E tax system super super easy.
Especially as a business owner, I feel like once you
start running a business, you get like a little bit overwhelmed.
You're like, oh my gosh, what's tax time going to be?
It's going to be crazy. If you've got all your receipts,
if you've been keeping track of your income, it's a cinch,
I promise. However, if you register as a business, you're
(30:51):
taxed on the profit, meaning that before tax time you
could actually look at business claims to help you reduce
your profit and pay less tax, and you can even
pay yourself out of that. So, for example, you might
have made like sixty grand for the year, and then
you bought a two thousand dollars laptop and decided to
pay yourself fifty thousand dollars. That's actually fifty two thousand
(31:12):
dollars in expenses, So you're really only claiming an eight
thousand dollars profit, Jess, and you'll be taxed from that
instead of the full sixty thousand dollars, which I think
a lot of people assume. Yeah, okay, right, So with
that said, if you're a service based business, it might
actually also be advantageous to be a sole trader. However,
(31:33):
if you need to buy products or materials to make
your business run, like, you probably have a heap of
outgoing costs, Whereas at tax time it would be better
to just have registered as a business because like you're
claiming them in arrears, if that makes sense. Yeah, so
it's just a little bit more complex.
Speaker 3 (31:48):
Yeah, that's interesting thinking about claiming something back under tax
because I feel like, even if you're not a business owner,
at tax time, everyone's always saying, what can I claim?
How can I mac surmize the money that I've earned?
Because no one likes paying cap No.
Speaker 1 (32:02):
One likes paying tax. But I also this is such
a spicy opinion. I'm always like, why are we here
justifying purchases for things that your business might not need,
just so you can kind of get a discount on them. Like, yes,
you're getting a tax benefit, but it doesn't make the
item free. You don't need a new car or a
new laptop just because tax time is coming. And yeah,
(32:23):
like if you genuinely need your new laptop, jests.
Speaker 3 (32:25):
Good time to do It's good time to do it.
Speaker 1 (32:27):
Do you know what there's usually sales on Like office
works is always like, oh, look at our laptops coming
up to the end of financial year. Sexy, very nice
if you already need one, because the claiming process happens
really quickly. So right, like let's say you're like, oh,
actually do need a laptop.
Speaker 3 (32:43):
It's June.
Speaker 1 (32:44):
You buy it on the fifteenth of June. You can
claim that ye at the thirty June tax time. But like,
if you bought it in December last year, still claimable
jests Yeah, I'm just trying to like stuff it in
that year and I just go this year, so silly.
You were making purchases that you didn't need to make,
so What can claim then, is my question? Oh my gosh,
there are so many things that you could claim, and
I could go on and on and on about it
(33:05):
because it totally depends on what industry you're in. You
in the adult industry, Jess, you could climb loop there go.
Are you in gardening and farming?
Speaker 3 (33:13):
Great? Do you know you can claim your dog and
garden nomes?
Speaker 1 (33:16):
Oh? Like wild? So let's give you some more practical advice,
because I don't think either of those things really help you. No,
but please don't guess what you can claim. Don't just
go oh, I assume I'd be able to claim that,
because you don't want to do this incorrectly, because if
the taxman audits you and it's incorrect, not only are
they going to ask you for the money, Jess gone
find you that's not good.
Speaker 3 (33:38):
As someone who's been audited as well, Like they dot
their eyes and they cross their t's.
Speaker 1 (33:42):
Yeah, and it's kind of like not innocent until proven guilty.
With the ATO, they're like, you're guilty until you prove
that you're innocent. And with you when you got ordered
to have your receipts, you would have had your receipts believe,
but like, imagine if you were me.
Speaker 3 (33:54):
Yeah, stressful.
Speaker 1 (33:56):
Thankfully I have Jess now so we're okay. But historically
I'm like, I have that receipt, but I would advise
getting an accountant who specializes in the field that your
business is in, who's actually going to know what you
can and can't claim. Now, Jess used to do your
tax yourself, and I bullied you because I am the
world's biggest bully, and I said, you have to go
(34:16):
to an accountant. Yes, was that a good decision? Life
changing decision? Why?
Speaker 3 (34:21):
I think at first I was always like, oh, I
can do my own tax myself. Why would I pace
when I was do it, like you said, twoundred fifty bucks,
you know, a decent amount of money, Like if I
can't a matter of money, why do it? But for me,
the amount of things that I just didn't know that
I could claim you as a sole trader.
Speaker 1 (34:35):
And I obviously sent you to someone who knew what
they were doing in your space. And I remember you
walking away being like you said I could claim this,
and I was like, well, yeah, of course you can,
because you aren't the tax person, and like, I'm a
money person, so I kind of knew some of those things. Yeah,
like invest the money one year and you know what,
if it doesn't work out, you get to claim it
or next year's tax. It's a win and then you
(34:56):
don't have to do it again. But nine times out
of ten, I'd say puts you in a way better
position than you could yourself.
Speaker 3 (35:02):
Yeah, and if you need a recommendation, we're happy to
pass you along to someone. So oh yeah, hit up
at a website. Well, yeah, there's a page on our website.
Hit up that and we can match you up with somebody.
Speaker 1 (35:11):
I mean, we'll match you up with someone real good.
But I hate to tell you this, Jess's accountants not
taking on new clients.
Speaker 2 (35:16):
Un lucky.
Speaker 3 (35:17):
Sorry.
Speaker 1 (35:18):
Also another hot tip Jess is have a look on
the ATO website. I know you probably don't frequent it.
You're probably not like waking up in the morning being
I'm just gonna have a little cover of Joe and
I'm gonna sit down on my laptop and look at
the ADO website.
Speaker 3 (35:31):
That's what I do, though, be more like VD I
like it.
Speaker 1 (35:34):
But look at the ATIO website because they have a
whole section around what you can claim and what you
can't claim and it changes depending on the business that
you run. And they also post lots of articles of like,
I mean, they don't market it this way. I'm just
trying to be sexy marketing for the ATO, But like
they have some horror stories on there too, of like
this person tried to claim this and they got in
(35:56):
trouble in this way.
Speaker 3 (35:57):
Yeah, I just love a pervy story me too.
Speaker 1 (36:00):
Kind of helpful.
Speaker 3 (36:00):
They have a really great forum too, where it's manned
by Atier stuff, and you can actually head in there
and post your question and be like, oh, theoretically if
I did this and did that hypothetically, yeah, like they
can't provide you personal advice, but you can kind of
ask generalized questions and it's coming straight from the source.
You know that it's correct because sometimes those clickbaity articles
(36:20):
that you see floating around at tax time.
Speaker 1 (36:22):
Yeah, like oh my gosh, did you know you can
claim your pridor handbag.
Speaker 3 (36:26):
I wouldn't take those as we're not going to take
those legitimately.
Speaker 1 (36:29):
I also think it's really important to check the Atier
website because each year in the lead up to tax time,
the ATO put out like a big statement and the
statement usually explains what they're targeting this year. Yeah, let's
use a recent example, so I think it was this
year they came out and said, all right, we're changing
the work from home claiming rules because during COVID, we
(36:52):
gave you guys a whole heap of concessions on what
you could and couldn't claim from home, and obviously we're
a little bit more lenient with that because lots of
people working from home. Now we're cracking down on that.
If you're claiming work from home, you're going to need
to back it up because we're probably going to audit
a heap of people in this situation. So it's nice
to just know where they're tightening up. Not so that
(37:14):
you can protect yourself even more, because you should be
doing the right thing in the first place, but it's
just pervy. It's good to keep her finger on the
pulse and stand good reminder. And also things that you
could claim last year might not be claimable this year,
so there might have been certain concessions or certain leniencies
that they're like, oh, well, Jess, we're going through COVID,
so you can claim this this year and then they
(37:34):
can't next year. So for example, there's an uproar in
the She's on the Money community this year because the
instant asset right off amount is actually decreasing next financial year,
or it has now decreased this year, whereas historically you
could claim a lot more on that. So you just
want to have your finger on the pulse, because if
you're going to make decisions financially, let's make sure that
(37:55):
you're not making them based on rules that don't apply
to you anymore.
Speaker 3 (37:57):
Yeah, so don't guess tax claims. We don't want to
be dancing with the devil, or in this case, the
tax man. Excellent advice.
Speaker 1 (38:03):
Oh hold on one more thing. Obviously I was saying
to you earlier, like, oh, yeah, I registered for GST earlier.
One of the additional benefits of registering for GST is
that you're able to claim it back. So if you're
not registered for GST JES, you're not able to claim
back the GST on any of your expenses or materials
that you purchased to sell. Okay, interesting, Just good to
(38:27):
know because you might go, oh, I claim that back
at tax time because you've heard that GST is claimable.
It's claimable if you're paying it. Yeah, so it's like
a two way street. If you're not on the two
way street, you don't just get to claim it when
you're not paying it.
Speaker 3 (38:38):
That makes total sense. Is there anything you want to
leave us with about bank accounts?
Speaker 1 (38:43):
Are you going to let me talk about bank accounts
in this episode to your favorite topic?
Speaker 3 (38:47):
Oh, this is my favorite episode.
Speaker 1 (38:49):
We don't even need the Sheese on the Muddy Podcast
as a whole anymore. We just need Victoria talking about
banking systems. So yes, obviously, always open a new bank
account for your business, whether it is big or whether
it is small, because it's going to help you keep
track of all of that money that is coming in
and going out. And I promise you are going to
want to keep track of that if you're registered for JSD.
(39:10):
Because obviously can't give personal advice, you could potentially think
about opening a separate bank account for that money to
go into it. I do that personally where you're not
going to spend it. I do the same for tax.
So while we said earlier we withhold thirty percent tax,
So like my business pays thirty percent tax, say ten
(39:30):
thousand dollars payment comes in, I automatically put three thousand
dollars into my tax account. H and I do that
because it makes me feel so comfortable. I go immediately,
if we pretend this was profit, I'm going to be
paying three grand tax on this at a minimum. And
then I take my JSD and pop that in a
separate account, and I know that I'm clean. I then
(39:50):
use the money that is left over, So the seven
thousand dollars left over, I leave that in my business account,
and that's what pays my bills. That's what keeps the
light on. Coming to tax time, I know that I
have the money set aside to pay tax. I pay
tax from that. My business accountant goes through everything at
tax time and then lets me know at the end
of the financial year what my true profit is. And
(40:13):
I like it that way, and it's honestly, I would
say a privilege to act that way, because I'm technically
putting aside a full thirty percent irrespective of what my
costs are, because, as you guys know, I have staff
to pay, I have rent to pay, I have overheads,
Like do you know how many subscriptions I pay for
like Photoshop and like podcasting apps. I cannot It's expensive
website management fees.
Speaker 3 (40:33):
Like we'll go through.
Speaker 1 (40:34):
All of these hidden costs of business at some point,
but like, I do not realize how expensive it is.
Side note Jessica, to have an edm ah, so to
have an email marketing platform, you go, oh, just sign
up for mail Chimp. And that's what I did when
I started chees on the money, just went straight to
mail Chimp.
Speaker 3 (40:50):
I was like, Slate, it's free. Do we love that?
Speaker 1 (40:52):
And you get to a certain amount of subscribers and
they're like, haha, it's paid to play, and you're like, oh, okay, no,
that's fine. I've got some subscribers, I'll pay and then
you get more subscribers. Anyway, back to the point separate
accounts because one, I like clarity, but two, putting aside
that money means that I sleep really well at night. Yeah,
knowing that there's money in an account to pay tax, there's
(41:13):
money in my other account to pay for my staff
and my team, and then at the end of the day,
we get to talk about profit once tax time comes
and goes. So I think it's really important to be
structured properly. And it might seem like a lot for
now because you're like the I have literally just started
my business. I earn like four dollars. You've got rocks
in your head, like, I cannot believe it. I just
(41:34):
went to sign up for this new business banking account.
It's going to cost me ten bucks, Like are you joking?
Ten bucks? And I haven't even made a profit yet. Yeah,
a promise that investment is worth it and getting it
right at the start is going to save you so
many headaches and also any questions from the tax man later.
Speaker 3 (41:51):
Yeah, and on a smaller scale, having that separate account
if you're doing all of your spending from that account
as well, it makes me really handy at tax time
if you're someone who maybe does lose their receipts or
forgets what they have and what they could claim. It's
almost like an itemized list of everything that you purchase.
So it's super duper handy, so easy.
Speaker 1 (42:10):
Your accountant and your book keeper at some point when
you have both of those are going to love that.
You're gonna love that more because you're not filtering through
Oh no, that was zoobreets. Oh that was me. Oh
that was you know me and sports girl.
Speaker 3 (42:21):
Oh, actually, that's a business expense. Start that one. Yeah,
like that's not helpful.
Speaker 1 (42:26):
That is not an effective use of your time. And
as a small business owner, you only have so much time.
We need to make the most of it, and having
a clean banking system is going to make it easier.
And justs onto that point of like, if you're someone
who loses your receipts, like Victoria Divine Years, you're going
to start an album on your phone and take a
photo of every receipt that comes in so that you
(42:46):
know that it's stored somewhere. That helps me a lot.
I mean, the ATO app actually enables you to upload
it directly, but like, I don't know if I want
to upload it right now, Like my accountant might go,
oh V but you know, work lunch only some of
it's claim But I just I like having it separately
so I can provide it all to my accountant. Yeah, separate.
(43:07):
But then also you can actually upload your receipts directly
to the ATO portal throughout the year to keep track.
Speaker 3 (43:13):
Of them here. That's also free. There you go. I
feel like we've covered a lot too.
Speaker 1 (43:18):
I feel like we've covered too much.
Speaker 3 (43:19):
It was a big episode.
Speaker 1 (43:20):
I am really sorry to all of the people at
the start of this episode that I might have got
hyped up when I said.
Speaker 3 (43:25):
This is a really.
Speaker 1 (43:25):
Sexy topic because it wasn't aware like, but I also
think being empowered in business, being on top of your numbers,
that is arguably very sexy.
Speaker 3 (43:35):
I completely agree. And now you know how to set
yourselves up for tax time without getting fined, without getting
in legal trouble, and hopefully without getting a headache, and
so your business groes exactly right.
Speaker 1 (43:43):
We love that. All right, Well, have a really good week, guys.
We'll see you next month for a Business Bible episode.
But as always, the conversation is going to continue over
on our Facebook group, the Business Bible, not She's on
the Money. We're going to keep that one separate because not.
Speaker 3 (43:58):
Everyone cares about business. That's okay, and that's all.
Speaker 1 (44:00):
Right, But we've found our niche and we love them hard.
Speaker 3 (44:03):
Yes, we do your our people.
Speaker 1 (44:05):
See you next time, guys, Hie.
Speaker 4 (44:15):
The advice shared on She's on the Money is general
in nature and does not consider your individual circumstances. She's
on the Money exists purely for educational purposes and should
not be relied upon to make an investment or financial decision.
If you do choose to buy a financial product, read
the PDS TMD and obtain appropriate financial.
Speaker 1 (44:33):
Advice tailored towards your needs.
Speaker 4 (44:36):
Victoria Divine and She's on the Money are authorized representatives
of Money. Sheper Pty Ltd a BN three two one
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five one two eight nine
Hello.
Speaker 2 (00:01):
My name is Santasha Nabananga Bamblet. I'm a proud your
the Order KERNI Whoalbury and a waddery woman. I would
like to acknowledge the traditional custodians of the land of
which this podcast is recorded on a wondery country, acknowledging
the elders, the ancestors and the next generation coming through
as this podcast is about connecting, empowering, knowledge sharing and
(00:24):
the storytelling of you to make a difference for today
and lasting impactful tomorrow.
Speaker 1 (00:30):
Let's get into it. Hello and welcome back to the
Business Bible. I am Victoria Devine, the owner of several
(00:51):
successful businesses.
Speaker 3 (00:52):
It's not going to get less weird saying that, is it?
Speaker 1 (00:55):
And I am joined by one of the hardest working
side hustlers. I know, miss that's greatch Ah, how kind,
very exciting, nice lady.
Speaker 3 (01:04):
You're a very nice lady, pumped it into episode two
of the Business Bible.
Speaker 1 (01:08):
I am also very excited because today is arguably one
of these sexiest topics. Jessica, we could talk about we're
gonna set up your small business books.
Speaker 3 (01:17):
Jessica, I feel like you're using the term sexy very loosely.
Speaker 4 (01:21):
Right.
Speaker 3 (01:21):
Oh no, no, I.
Speaker 1 (01:22):
Think it's really sexy today we are talking tax we're
talking avns and bank accounts.
Speaker 3 (01:29):
Was that sexy talk? Don't it to me? Tell me more?
Speaker 1 (01:31):
In all seriousness, though, Jesse, this is the one thing
that I have on and on and on to people
saying I'm going to start a small business or I've
got a small business, Please set up your books properly
from the very beginning to ensure that everything runs smoothly
and we don't get into any trouble with the ATO,
because there is honestly nothing less sexy than having the
ATO knocking on your door, right, Like it's the one
(01:53):
thing that I just go, No, just go and get
another bank account, Just go and set it up separately,
get an ABN. Stop underestimating the power of your business,
Like yeah, you would hear it all the time where
people are like, oh no, I can't be bothered, Like
I don't do that much work, Like you could just
be an influencer on the side, you know, making a
couple of hundred dollars or you could you know, have
(02:14):
like and I always use a candle business because I
kind of like feel like that's scalable. It could be
as big as glass house or like a coyer or something,
or it could just be something that you like spend
sundays like pouring candles because you really like it and
sell them to friends and family. Yeah, but it's one
of those businesses where you might go it's not worth it. No,
it is worth it. And the second you say it's
not worth it, you're not believing in your business. And
(02:35):
so having set up books is going to be the
stable foundation of making sure that your business is successful, which, Jessica,
is very sexy.
Speaker 3 (02:44):
That does sound very sexy to me. I think it's
probably really confusing to a lot of people, which is
why they don't often do it properly. But as someone
who has kind of been through it, I think there
is nothing worse than getting to tax time and being like,
oh my god, everything's everywhere. So if you set it
up now, saving yourself all of that stress in six
or twelve months time, and you too will agree that
it is very sexy.
Speaker 1 (03:06):
Rois I promise, And it can be super complicated, right,
So we'll try and make it as easy and clean
as possible today, starting with getting an ABN. Jessica, you
have one. I do a big dog and ABN is
what is called an Australian business number, which is a
unique number that identifies your business to the government and
(03:26):
also to your consumers. It's absolutely necessary for tax purposes,
for invoicing and at times for your banking. Okay.
Speaker 3 (03:34):
I have an ABM because I got one as a kid,
because I modeled for Target once.
Speaker 1 (03:39):
Target.
Speaker 3 (03:40):
Yeah, I was in a big post and my mum
tried to take it home. They wouldn't let it. So
I actually wouldn't let it. Mere, who is this crazy woman?
Please get act out of the kid section.
Speaker 1 (03:51):
That's very fair.
Speaker 3 (03:52):
But I had one set up and I think I
just had to renew it. I didn't actually start from scratch,
So tell me a little bit more, okay.
Speaker 1 (03:57):
So it is really important because when we actually talk
about an ABN, and it's not as simple as just
like trotting down the road and picking up your ABN.
I mean, it is that simple online you just apply
for it, but there are actually several different options when
signing up for an ABN, and I feel like lots
of people get analysis paralysis. So let's go through the
three main types today. So the first is not having
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an abn at all, So no, by no, this is
when you choose not to register your business with the government,
and this is only for small businesses that turn over
less than seventy five thousand dollars per financial year, so
it means that you're kind of functioning under your personal
name completely. It's perfect for side hustles or if you
want to make a bit of money on the side
and you aren't expecting the business to grow, and you
(04:39):
don't really want it to grow. You're just like, oh,
I did some gardening, and you know, one year, I
just was like trying to smash down debts, and so
I offered my gardening services for you know, the period
over Christmas, and I'll never do it again. But I
did accept business income, and obviously I wanted to make
sure that that was all clean and I paid tax
on it and stuff. So that could be a good example.
(05:00):
I also be, as I said before, a mini influencer
doing a few brand deals here or there.
Speaker 3 (05:04):
Or maybe you're like.
Speaker 1 (05:05):
Side hustling as much as Jess does, and you're renting
your clothes out on the side, so you might have
like a few dresses listed on the vault or something
that is not a hobby. That is actually something that
you need to pay tax on it. And I think
there are a lot of people who are quite flexible
about tax. I'm not one of those people because I'm
kind of like, do it right, do it once, don't
(05:26):
get in trouble, full stop, end of story. Whereas I
have heard historically people go, oh, well, it could fall
under being a hobby if you're earning less than five
thousand dollars a year from it. And I look at
that and I just go, yeah, but like, you're trying
to generate additional income. It's not like I just sold
a chest of draws on Facebook marketplace once off, Like
you fully set up this business structure online to generate
(05:51):
income from your wardrobe. Yeah, And so like I'm a
little bit more cut and dry, and I go, no,
you definitely need to be doing tax on that. But
the important thing there is talk to your accountant if
you're worried, because obviously I can't give you personal advice,
but essentially, you could just be selling some goods that
you create yourself, knowing that it's just never going to
exceed seventy five thousand dollars a year. So like it's
kind of, you know, the gateway to having an ABN.
Speaker 3 (06:14):
Yeah. Interesting addendum. If you're providing a service to somebody,
and I only know this because it happens to me once,
if you do not have an ADM, often the company
or the person paying you will behold the highest tax rate.
Like typically you would be taxed at your marginal tax rates.
So for example, if you were being taxed, it is
it twenty three twenty four?
Speaker 1 (06:36):
What's the thirty two and a half percent really tax rate?
I would like to swap it to twenty three.
Speaker 3 (06:41):
You've just like flipped.
Speaker 1 (06:43):
It's not wrong, just a little on the wrong side
of the tracks. Yeah, so I'd like to do that. Yeah,
if we could drop it, i'd me up to that.
Speaker 3 (06:50):
If you were earning under the threshold, your business income
would be taxed if you were trading at like that
same tax rate. But if you're supplying to somebody else,
they will often withhold the top rate of tax, so
it might be high, so you end up paying more
tax than you would that you had ab It come
a little bit complicated, but also good to know. Keeping
(07:12):
tip bit on the side because not having an ABN,
obviously you kind of go oh, well, I'm never gonna
make more than ten grand from.
Speaker 1 (07:18):
This little side hustle. However, it also leaves you open
legally to a lot of like impact, if that makes sense.
So you know, if something happens, just your butt's on
the line. Yeah, like it's you personally, and I just
go oh, like, if I'm starting to provide a product
or a service, like I want some level of protection.
(07:38):
And also I just like things to be quite clean.
Even if you don't have an ABN, I would still
be looking at having your own bank accounts and making
sure that your business income is separate from your personal income,
just to make things easy for you. So don't think
that you're going to get out of me giving you
a sexy banking structure just because you go no ABN,
no worries.
Speaker 3 (07:59):
Yes, no ABN, more worries, more worried, more worries. Tell
me about the next category, which is actually the one
that I fall into. Okay, So this is sole trader.
Speaker 1 (08:06):
So this is for a business of one person or
someone likely to pay for contractors or freelancers. So look
at the future of your business. Do you see it
just being you? Are you just always going to freelance.
This option is free, sexy, and can be done through
the ATO website and only through the ATO website, and
it can be done really quickly and easily. When you're
(08:27):
googling sets up ABN. Please do not click any of
the links that are like this proversion will help you.
Speaker 3 (08:34):
No, don't do it. It's really easy.
Speaker 1 (08:37):
It's really easy and it's free to do. Don't pay
some plub who's trying.
Speaker 3 (08:41):
To scare you. Really literally take advantage of you.
Speaker 1 (08:45):
Also on that every year, Yes, I get multiple of
these letters in the mail from people going your ABN's
up for renewable or something of the like. Reader, is
it from the ATO. If not, it's a random marketing
company who has searched your ABN on the ABN website.
My address is on there, like my business address, like
so that people can contact me. That's how business works.
Speaker 3 (09:07):
But they send a.
Speaker 1 (09:08):
Little marketing email that looks like an invoice and they go,
just you know, scam this QR code and pay us
and we'll get it all sorted out for you.
Speaker 3 (09:17):
That's awful.
Speaker 1 (09:18):
Yes, it is a trap.
Speaker 3 (09:19):
It is a scam. Oh my god.
Speaker 1 (09:21):
So we only talk one on one with the ATO.
There will never be a third party unless it is
your nominated third representative, which will probably be your accountant.
So if it is not coming directly from the ATO
and it is, you know, from another company, run yeah,
run because they're scary. But just you're a soul trader.
Why did you pick sole trader for your personal circumstances
(09:44):
and not just having no aben?
Speaker 3 (09:46):
Oh, I think it was kind of I was invoicing
companies and they were kind of going, where's your ABIEN, And.
Speaker 1 (09:52):
I was like, I don't have one for you to
put into your system, and sorry.
Speaker 3 (09:55):
You have a look And a lot of the time
companies do need them to set up like purchase orders
and things on their end, and that was and I
was like, oh, I need to renew the one. And
thankfully I had one that was existing.
Speaker 1 (10:03):
And that's just as easy to renew as it is
to set up. Honestly, you just need some identification. Yeah,
let the government know what the purpose of the business
is and hits amit, Like it's so easy.
Speaker 3 (10:12):
It was so easy, And I think it also made
me feel a little bit legitimate too.
Speaker 1 (10:15):
Like she's got an ABN on her invoice.
Speaker 3 (10:17):
Yeah, Like I felt like a proper person that was
actually trading goods and services. You know, I felt like
it just made me a little bit more legit, which
might be silly.
Speaker 1 (10:25):
But no, no, no, no, I think it's really important to
feel legit when you're doing your business as well. I
know it can be you know, a little bit fluffy
because people will go, well, you know, if one person
ends ten thousand dollars with no ABN, and you're saying
that having an ABN, I'm still just going to earn
the same amount doing the same thing, you might go, well,
what's the point. Yeah, the point can sometimes honestly be legitimacy.
(10:46):
As somebody who hires a lot of freelancers and soule
traders to do like, you know, random content. Sometimes sometimes
we'll do events. Yeah, I want you to have an
ABN because protects me. It means that I am, you know,
paying an invoice directly to an actual business that can be.
Speaker 3 (11:01):
Traced, everything's clean. Yeah, And so I prefer to work
that way.
Speaker 1 (11:05):
So often it could actually be the difference between you
being picked and another sole trader being picked. So I
think that it's important to just set it up to
make it as easy as possible. For your consumers and
your clients as well, because the less friction during that process, promise,
the more money will come in your door.
Speaker 3 (11:23):
Yeah, one hundred percent. There is a third.
Speaker 1 (11:25):
There is a third, and that's.
Speaker 3 (11:26):
What I have.
Speaker 1 (11:27):
I have a company set up, So a company is
a legal entity in its own right, unlike a soule trader.
So there's a bit of protection for you and your
personal assets, obviously having a business in between them, which
to me sexy because I didn't work this hard to
you know, have something happen in the future obviously, Like
I'm pretty open and honest about it. It's not like
(11:49):
I'm worried that something's going to happen. But I don't
really want my house to be at risk when I've
got a company, Like you know, if you're earning ten
thousand dollars from a side hustle, that to me is
quite different to my entire livelihood being at risk. And
like I'm responsible for a lot of people's incomes. Yeah,
so I just want that protected.
Speaker 3 (12:07):
The buffer.
Speaker 1 (12:07):
I'm sure Jess, you feel a lot more protected knowing
that there's a business structure there, there's something legit set up.
The only way to employ full time, part time or
casual stuff is to have a registered company, so you
can't just be a sole trader and hire someone. You
actually have to set up your entire business structure differently
to hire your first employee, which, if you're looking at it,
(12:28):
you know, in your circumstance, just I doubt you're ever
going to hire an employee because of the way that
you work and what your plans are. But like what
if you were like, oh, actually I want to take
content creation full time, Like I'm going to take this
really legit. One day, my personal income is going to
outweigh the amount of income that I make in my
full time job, and I'm going to quit. Yeah that's
(12:49):
exciting or happens when you quit, Jess, you might need
to hire a personal assistant. Oh you know, legit. If
you've taken this full time, you might want to expand
and have that support, so you need to think about
this could be the same. My favorite example the candle business. Yea,
it might be you pouring candles on a Sunday afternoon
because it's really therapeutic. One day you go viral and TikTok,
(13:12):
exciting money win, like such a business win. We'll talk
about going viral and TikTok and a whole episode one day.
But you go viral, everyone's placing candle orders.
Speaker 3 (13:21):
You've got two hands, You've only got two hands. How
do you pour all the candles? Exactly?
Speaker 1 (13:25):
It just gets very stressful, Jessica. So we need to
think about what could happen in the future. But it
is an investment, so it does cost between four hundred
and seventy four and five hundred and seventy six dollars
depending on the business that you are registering. And it
does come with a bit more responsibility in that you
need to do a bit more reporting, So you're likely
(13:47):
going to have to submit quarterly documentation to the ATO
about what's going on with your business, how much you've earnt,
how much tax you are anticipating to pay at tax time.
And something that I do with a lot of small
business owners do is pay what's called bas and bas
is essentially paying your tax in advance, because there is
(14:08):
nothing more stressful as business increases, right, even as business
doesn't increase, Like jess House, tax time as a small
business owner not very fun, right, But if you're paying
bas you're breaking up the tax that you're paying throughout
the year, and then tax time comes and my accountant
sits me down and we kind of do like an
audit of like what have you paid? What are things
(14:30):
that we could now claim, what are things that you
might have missed out on, and what are things that
you still have to pay for? And my tax time
like come June thirty, I look at it and I go, okay, well,
I'm not going to owe thousands and thousands of dollars.
You know, there's a bit of cleanup going there. So like,
bas it's a business activity statement if I didn't say
that before, but a bas is kind of like predicting
(14:52):
based on your past performance what your future tax will
be so that I don't end up in a sticky
situation where I have a heap of tax owing all
at one time.
Speaker 3 (15:01):
Yeah, and that's like all you can ask for, is that?
Speaker 1 (15:03):
Okay?
Speaker 3 (15:04):
So question Yes, If I'm currently assult trader and I've
picked s soul Trader because I think that's going to
work for me, I am just working by myself, doing
my thane, doing what you're doing now exactly right. What
happens if I do get to the point like you
said in a couple of years where maybe I do
leave my full time job and I do need somebody
to come on and help.
Speaker 1 (15:22):
Can I change? Of course you can, although it does
get a little bit difficult changing. So that's why I
always recommend people you know you go. It could be
four hundred and fifty bucks like to set up the
entity to begin with, why bother. Yeah, sometimes it's worth
spending the money on the structure to begin with if
that could even be a possibility, and if it doesn't
(15:44):
become a possibility, you just have more projections.
Speaker 3 (15:46):
That's not the end of the world. Please don't get
me wrong.
Speaker 1 (15:48):
I totally understand that it's a privilege to be able
to afford literally everything. As somebody who started their business
by making all their their graphic design or a Microsoft
office and screenshotting it go, I get it. But it
can be really difficult to change from a sole trader
ABN to a company ABN down the track. So I'd
really suggest just get it right the first time. But
(16:10):
it's not just the difficulty in the paperwork. It can
actually be costly to set it up and change it
because you're going from a business that you know as
a sole trader has value into another company and structuring
it actually can be a little bit more complex than
what it seems. So obviously you're going to want to
weigh up your decisions financially, time wise, and work out
(16:33):
which one is the right one for you, because obviously
moving to a company is expensive, not to overload you.
Moving to a company is expensive. But who then owns
the company, Jess? So it's not just going, oh, well,
maybe I'll own your company, Jess, that's not the question
I'm asking. So my personal structure, And this is why
I love the Business Bible because I can just tell
(16:55):
you what I do. I'm not saying that this is
the right thing for you, This is the right thing
for me. But I when I set up my companies
at the same time established a family trust. So my
family trust owns my businesses, not me. Personally, you personally
can own a company, but you need to maybe spend
the couple of one hundred dollars sitting down with an
(17:16):
accountant going well, if I'm going to set up this company,
what is the best way to protect me? What is
the best way to own this? Do I own it personally?
You can totally own it personally, that's fine, That's a
really simple structure, but your account and might turn around
and be like, well, actually, what are your plans for
the future. So one of the reasons why we made
this decision is because in the future, before my business
(17:38):
made any money, I was like, you know what I
would love for the structure. You know, it's kind of aspirational.
It gave me a lot of motivation as well. I'd
love to be able to buy an investment property, and
I would love to be able to put that investment
property in a trust so in the future I can
distribute the dividends of that investment property down to my
family members. Could I afford any investment Probably at that
(18:01):
point in time, no, Jessica.
Speaker 3 (18:02):
The answers no, because I was in debt when I
started my business. As I said, did you even have
one property at the time?
Speaker 2 (18:07):
No?
Speaker 1 (18:07):
Hype dream, hype dream. But we want to make sure
that we're setting ourselves up for success. And that's one
way to additionally protect yourself that you really should have
the conversation with an account and go, well what does
that mean for me? Like, you know, jess you might
be hiring your first assistant or content creator or whatever
you're doing, but what next, where does the ball roll? Yeah,
(18:28):
so I think it's important to understand.
Speaker 3 (18:30):
One hundred percent to switch gears. Ever so slightly, I
just want to go back a few steps because earlier
we were chatting about the seventy five thousand dollar threshold,
and so if you're earning less than seventy five thousand dollars,
you're all guccy. But what happens when you're earning more?
Because that's what we all want, right like, we want
to be earning heaps money.
Speaker 1 (18:47):
We're going to become so rich. We're going to be
rich af So as soon as your gross income hits
seventy five thousand dollars. Gross income is total earnings prior
to tax or deductions. So when you look at that number,
I think it's gross because that's what you could have
taken home but you had to pay tax.
Speaker 3 (19:05):
That's so fun. So and then net is what you
captured in the net.
Speaker 1 (19:08):
That's really big holes, Jessica. So you're not going to
forget that now, but you need to register and pay
what's called goods and services tax. I'm a finance girly
at heart. If you send me an invoice, jess and
you're not charging me EGST immediately, I know how much
your business turnover is true, I know you're earning less
than seventy five thousand dollars. Yeah, okay, so this is
(19:29):
again not personal advice. Do you know what I was
doing before I earned more than seventy five thousand dollars? Yes,
what I was still charging your GST. I was paying
GST because you can pay GST irrespective of what you earn.
Its choice up until seventy five thousand dollars. After seventy
five thousand dollars.
Speaker 3 (19:47):
It's compulsory.
Speaker 1 (19:49):
Before seventy five thousand dollars, they're like, you don't need
to do this, you could if you wanted to. Me
earning ten thousand dollars, I'm like, I want to because
do you know why? It's kind of like left pocket,
right pocket. I'm charging you just ten percent GST gets
added to your invoice. I put that ten percent to
the side, and I just pay it to the government.
So I'm not losing money by charging GST. But I
(20:09):
knew that by sending out an invoice that charged GST,
people would immediately go, oh, she's done this before. Yeah,
she's just been earning a fair bit.
Speaker 3 (20:17):
It's that professionalism thing again, a little bit sneaky.
Speaker 1 (20:20):
Should you do it? I don't know you do, you Booth,
but I did and it made me feel powerful.
Speaker 3 (20:25):
Af I love that for you.
Speaker 1 (20:26):
So GST is essentially an added ten percent of the
product or service that you are selling, which has to
be paid to the tax office. It's not your money,
as I said before, it's left pocket, right pocket, Like,
it's not going to cost your business more unless you
somehow have not a clean banking system and you forget
about the ten percent and then you allocate it to
something else, and then come tax time they're like, hey,
(20:48):
by the way, you've got to pay your GST and
you're like, wait what.
Speaker 3 (20:51):
I don't have that money right now.
Speaker 1 (20:52):
Yeah, which is why we want clean banking systems, Jessica.
But it has to be paid, and you can't just
be having no ABN. Must have an ABN at this stage.
So the second you get over seventy five thousand dollars,
if you had no ABN, baby, it's time to get
an ABN. Like it's non negotiable at that point because
the ATO looks at it and goes, this is pretty legit,
Like seventy five thousand dollars is a lot of money
(21:14):
that we've let you earn. So once you hit seventy
five thousand dollars, your job in business now has two rules.
First running the business and second collecting tax.
Speaker 3 (21:23):
For the tax office. Our tax man's sounding pretty happy
about that. He's a nice guy, I promise. What does
happen if we are maybe not keeping a close enough
eye on our bank accounts, maybe we haven't structured it
in the best way. Definitely not speaking for experience, but
what happens if you miss the seventy five thousand dollars
milestone and you are late to register for.
Speaker 1 (21:43):
GST, Probably gonna have a meltdown, yeap first, probably gonna
just be a little bit anxious, a little bit stressy.
Speaker 3 (21:49):
We're not gonna let that be an option.
Speaker 1 (21:51):
I would register for GST when setting up my ABN,
just being real clean from the very start, to be
honest for a few good reasons. So obviously, as I
said before, once you start charging GST, that's going to
be an extra ten percent for your clients or customers
to pay. And if you start prices including that ten percent,
you don't have to re talk to your clients Jess. True,
(22:13):
So like you get this seventy five thousand dollars, you're partying.
You've probably gone out with your part or your friends
have some champagne. Like, look at my business, I'm killing it.
Now you have to go to your clients and be like,
by the way prices are increasing ten percent, you don't
get more. Actually, I just have to start collecting money
for the ATO.
Speaker 3 (22:29):
I didn't think of.
Speaker 1 (22:30):
Your client's not gonna love that, not because they're not
happy for you, but like, no one wants to pay
more money, Jess. So if you just did it from
the start, there aren't any price hikes once you suddenly
become qualified to pay for that. Yeah, And I like that, Yeah,
because I like being paid for your worth. I mean,
if we're asking for a ten percent pay rise, it's
gonna be for you, Jess, not for the ATO.
Speaker 2 (22:51):
Right.
Speaker 1 (22:51):
The second thing is, again makes your business look more
legit when you charge for GST and when you don't,
it's very clear that you're making less than seventy five
thousand dollars. I mean maybe not everyone looks at it
the same way I do, but I definitely you're extra nosy.
And if you're working for any other big businesses. I
don't mean to be rude here, but like, let's say
your freelancer, let's say you're just GRICI right, you are Jessica,
(23:14):
and you make content, beautiful content that for other brands,
they see all of the influences in voices. Yeah, so
if one's coming through with GST and one's not coming
through with JST, if you're new in PR, you might go, oh,
we just got her invoice for jess she didn't charge GST.
Speaker 3 (23:30):
What's that mean.
Speaker 1 (23:31):
They're gonna ask.
Speaker 3 (23:31):
If they're gonna know, everyone's going to know. Yeah.
Speaker 1 (23:34):
And I'm not saying that that's shameful. No, Like it's
not a bad thing at all, but you need to
understand if that's something you want considered or not. And
then three, it's done well ahead of time, so you
don't actually have to worry about accidentally missing it or
paying in arrears or you know, upsetting the tax office,
which is my favorite thing not to do.
Speaker 3 (23:52):
Yeah, I hard agree from me there. I think set
it up early. I think that's the premise of this
whole episode, really, isn't it, Like, let's get your ducks
in her own new so that nobody's having a meltdown exactly.
Speaker 1 (24:02):
We don't have meltdowns. And getting your ducks in a
row is not just smart when it comes to I
guess business and getting the structure right. It's also so
essential from my perspective, because it means that you believe
in your business. So if you're just like, oh no,
just do it through my personal account, it's not worth
it. It's not going to grow be like sorry, that's not
the mentality that we have when we're starting our own
(24:22):
small business. We don't need to take over the world
with our small businesses. Like our small businesses could just
be that extra ten k year so you get a
bougie family holiday once a year, and like that's why
we're doing it. But we are proud of that. We
actually believe in that, and we you know, have conviction
in that because ten grand this year might be twelve
grand next year, and like things just creep up and
(24:44):
that's great.
Speaker 3 (24:44):
But the structure is what's.
Speaker 1 (24:46):
Going to crucify you if you don't get it wrong,
and that's where most people do go wrong. Yeah, for sure.
Speaker 3 (24:52):
All right, we've given you a lot to think about
talking about GST and ABNS and all of those different options,
so we not let that marinate in your brain from
a little marinate away, and then we're going to head
to a quick break, and when we come back, we're
going to talk about claiming and tax in small business.
Speaker 1 (25:07):
I love these episodes so much. Don't go anywhere.
Speaker 3 (25:20):
Welcome back, everybody. We've gone over how to set up
your business, get it ready for tax time, and now
I want to talk about what actually does happen at
tax time because it seems like very my birthday, that's
very true, Jin.
Speaker 1 (25:30):
Thirty good time to work in finance.
Speaker 3 (25:34):
I know, it's amazing. Is tax time a little bit
different if you're registered as a sole trader versus as
a company.
Speaker 1 (25:40):
Yeah, so it's a good question, and they are actually
very different to one another, which might help you decide
whether to register as a sole trader or as a business.
So sit down, I've written a list, right, are you ready?
I'm ready. As a sole trader, your profits will be
included on your individual tax return, so you will be
paying tax at your personal marginal.
Speaker 3 (26:00):
Tax rate, which so what we're talking about before.
Speaker 1 (26:02):
Yeah, so obviously that thirty two and a half percent
is just standard, but it goes up much higher, and
maybe you're in a situation where you're like, oh, well,
actually another you know, ten grand actually pushes me over
a threshold. We need to think about that. It's an
extension of you and your personal financial affairs, and it
actually makes tax time really easy. So like back on
(26:23):
the flip side, me trying to do a jump scare.
Most like, it's really easy to do your tax when
it comes to being a sole trader. If you're registered
as a business, you will have to do the tax
for your business and your own finances because they're not
bundled together like a sole trader, and that is not
only more complex, but can be a little bit more costly.
(26:43):
So you might be paying I don't know, Jess, what
do you pay for your tax return each year? Maybe
like two hundred and fifty bucks.
Speaker 3 (26:48):
Nowadays around then, it's pretty standard.
Speaker 1 (26:51):
You'll be paying maybe four or five hundred dollars for
a tax return done for your business in addition to
your individual tax return. So just keep that in mind. Yep,
big businesses pay thirty percent tax rate on profits.
Speaker 2 (27:04):
Jess.
Speaker 1 (27:04):
Oh, just flat, just flat there, you go, very very sexy.
Profit means the money you've made after pay deductions, et cetera.
Not just the gross income that you look at that
you go, well, that's gross. I could have made that.
So it's not you know, if you had ten thousand
dollars coming in the door as a business, they don't
(27:24):
go all right, well you are thirty percent of that.
And this is why tax time can be a little
bit complicated because you go through that and go, okay,
well I paid, Jessica, I also you know, paid rent
for my facility. I also had these printing costs for
my business. And you have all these costs the deduction
that are deductions, and then at the end of that
is your profit and that's what you pay tax on.
Speaker 3 (27:45):
Okay, that's pretty good.
Speaker 1 (27:46):
So look it's pretty good. But as we said, big
business pays thirty percent. You go, that's pretty sexy, jess
because obviously the average marginal tax rate is thirty two
and a half cents. It's two and a half percent
better off.
Speaker 3 (27:58):
It's pretty good to make.
Speaker 1 (27:59):
Just do it some basic maths, not advice again, small
business tax jess reduced twenty five percent.
Speaker 3 (28:06):
Okay, so we're getting closer to that prostage you made.
It's much closer. That's pretty good, much.
Speaker 1 (28:12):
More palatable throughout the year. You're obviously, as I said
at the first half of this episode, you're going to
be required to complete what's called a business activity statement
or a MASS as you call it in the industry,
which is quarterly. And I've written down it can help
it tax time, it doesn't. It definitely does help it
tax time, not can it does? It makes me feel
so on top of it. Yeah, I don't like having
(28:33):
to talk about tax quarterly, but I promise everything is
easier when it's broken down into smaller chunks. Yeah, So
it kind of becomes a little bit sexier when you
start talking about the cash rate, right, Jessica, because you
know small business is tax at a reduced rate of
twenty five percent. You go, hold on, so twenty five percent.
What if I was, you know, earning this seventy thousand
dollars in addition to my normal income, and I've had
(28:56):
a really good tax here that it would actually push
you as an inn individual, like if you're working as
a sole trader, it is included on your individual tax return,
which might push you to the highest marginal tax rate
in Australia is forty five percent tax. Yes, and that
means you would earn over one hundred and eighty thousand dollars,
which if you are an individual who has a PAYG
(29:18):
job and a side hustle, it's not that hard to
get to that number.
Speaker 3 (29:21):
Yeah, totally plausible.
Speaker 1 (29:22):
Totally plausible. Like we're not talking about pipe dreams and
oh my gosh, I wonder like one hundred and eighty thousand.
Speaker 3 (29:26):
Dollars for a PAYG job. You go, wow, that's a
lot of money.
Speaker 1 (29:29):
Yeah, but if you're doing two jobs at one time,
you kind of go, all right, well, I might earn
you one hundred and ten one hundred and twenty in
my normal job, and then I might, you know, earn
another seventy.
Speaker 3 (29:38):
Well, now you're at the highest marginal tax rate forty
five thousand we need, yeah, forty five percent.
Speaker 1 (29:43):
Yeah, you're not on tax, you're on practical advice. I'll
be on the math side of things, right, So to
keep it that way, but I think it's really important
to I guess look at that because twenty five percent
bit sexier than forty five percent. Yeah. There's also obviously
going to be things about distributing that income, so we'll
talk about that later. But they are very different.
Speaker 3 (30:04):
Okay, before the breaker gave the example of someone who's
looking at the sole trader model, but they could maybe
decide to go the other way and go for a
business instead. Are there any advantages around tax time to
eat the model that may help people decide which category
would be the best option for them.
Speaker 1 (30:20):
So the answer is yes. First thing first, as a
sole trader, tax is just easier and faster to do.
It's the same way you've been doing tax always. It's
just another line item, pop it in and it spits
it out.
Speaker 3 (30:30):
It's very straightforward.
Speaker 1 (30:31):
The ATO now has their E tax system super super easy.
Especially as a business owner, I feel like once you
start running a business, you get like a little bit overwhelmed.
You're like, oh my gosh, what's tax time going to be?
It's going to be crazy. If you've got all your receipts,
if you've been keeping track of your income, it's a cinch,
I promise. However, if you register as a business, you're
(30:51):
taxed on the profit, meaning that before tax time you
could actually look at business claims to help you reduce
your profit and pay less tax, and you can even
pay yourself out of that. So, for example, you might
have made like sixty grand for the year, and then
you bought a two thousand dollars laptop and decided to
pay yourself fifty thousand dollars. That's actually fifty two thousand
(31:12):
dollars in expenses, So you're really only claiming an eight
thousand dollars profit, Jess, and you'll be taxed from that
instead of the full sixty thousand dollars, which I think
a lot of people assume. Yeah, okay, right, So with
that said, if you're a service based business, it might
actually also be advantageous to be a sole trader. However,
(31:33):
if you need to buy products or materials to make
your business run, like, you probably have a heap of
outgoing costs, Whereas at tax time it would be better
to just have registered as a business because like you're
claiming them in arrears, if that makes sense. Yeah, so
it's just a little bit more complex.
Speaker 3 (31:48):
Yeah, that's interesting thinking about claiming something back under tax
because I feel like, even if you're not a business owner,
at tax time, everyone's always saying, what can I claim?
How can I mac surmize the money that I've earned?
Because no one likes paying cap No.
Speaker 1 (32:02):
One likes paying tax. But I also this is such
a spicy opinion. I'm always like, why are we here
justifying purchases for things that your business might not need,
just so you can kind of get a discount on them. Like, yes,
you're getting a tax benefit, but it doesn't make the
item free. You don't need a new car or a
new laptop just because tax time is coming. And yeah,
(32:23):
like if you genuinely need your new laptop, jests.
Speaker 3 (32:25):
Good time to do It's good time to do it.
Speaker 1 (32:27):
Do you know what there's usually sales on Like office
works is always like, oh, look at our laptops coming
up to the end of financial year. Sexy, very nice
if you already need one, because the claiming process happens
really quickly. So right, like let's say you're like, oh,
actually do need a laptop.
Speaker 3 (32:43):
It's June.
Speaker 1 (32:44):
You buy it on the fifteenth of June. You can
claim that ye at the thirty June tax time. But like,
if you bought it in December last year, still claimable
jests Yeah, I'm just trying to like stuff it in
that year and I just go this year, so silly.
You were making purchases that you didn't need to make,
so What can claim then, is my question? Oh my gosh,
there are so many things that you could claim, and
I could go on and on and on about it
(33:05):
because it totally depends on what industry you're in. You
in the adult industry, Jess, you could climb loop there go.
Are you in gardening and farming?
Speaker 3 (33:13):
Great? Do you know you can claim your dog and
garden nomes?
Speaker 1 (33:16):
Oh? Like wild? So let's give you some more practical advice,
because I don't think either of those things really help you. No,
but please don't guess what you can claim. Don't just
go oh, I assume I'd be able to claim that,
because you don't want to do this incorrectly, because if
the taxman audits you and it's incorrect, not only are
they going to ask you for the money, Jess gone
find you that's not good.
Speaker 3 (33:38):
As someone who's been audited as well, Like they dot
their eyes and they cross their t's.
Speaker 1 (33:42):
Yeah, and it's kind of like not innocent until proven guilty.
With the ATO, they're like, you're guilty until you prove
that you're innocent. And with you when you got ordered
to have your receipts, you would have had your receipts believe,
but like, imagine if you were me.
Speaker 3 (33:54):
Yeah, stressful.
Speaker 1 (33:56):
Thankfully I have Jess now so we're okay. But historically
I'm like, I have that receipt, but I would advise
getting an accountant who specializes in the field that your
business is in, who's actually going to know what you
can and can't claim. Now, Jess used to do your
tax yourself, and I bullied you because I am the
world's biggest bully, and I said, you have to go
(34:16):
to an accountant. Yes, was that a good decision? Life
changing decision? Why?
Speaker 3 (34:21):
I think at first I was always like, oh, I
can do my own tax myself. Why would I pace
when I was do it, like you said, twoundred fifty bucks,
you know, a decent amount of money, Like if I
can't a matter of money, why do it? But for me,
the amount of things that I just didn't know that
I could claim you as a sole trader.
Speaker 1 (34:35):
And I obviously sent you to someone who knew what
they were doing in your space. And I remember you
walking away being like you said I could claim this,
and I was like, well, yeah, of course you can,
because you aren't the tax person, and like, I'm a
money person, so I kind of knew some of those things. Yeah,
like invest the money one year and you know what,
if it doesn't work out, you get to claim it
or next year's tax. It's a win and then you
(34:56):
don't have to do it again. But nine times out
of ten, I'd say puts you in a way better
position than you could yourself.
Speaker 3 (35:02):
Yeah, and if you need a recommendation, we're happy to
pass you along to someone. So oh yeah, hit up
at a website. Well, yeah, there's a page on our website.
Hit up that and we can match you up with somebody.
Speaker 1 (35:11):
I mean, we'll match you up with someone real good.
But I hate to tell you this, Jess's accountants not
taking on new clients.
Speaker 2 (35:16):
Un lucky.
Speaker 3 (35:17):
Sorry.
Speaker 1 (35:18):
Also another hot tip Jess is have a look on
the ATO website. I know you probably don't frequent it.
You're probably not like waking up in the morning being
I'm just gonna have a little cover of Joe and
I'm gonna sit down on my laptop and look at
the ADO website.
Speaker 3 (35:31):
That's what I do, though, be more like VD I
like it.
Speaker 1 (35:34):
But look at the ATIO website because they have a
whole section around what you can claim and what you
can't claim and it changes depending on the business that
you run. And they also post lots of articles of like,
I mean, they don't market it this way. I'm just
trying to be sexy marketing for the ATO, But like
they have some horror stories on there too, of like
this person tried to claim this and they got in
(35:56):
trouble in this way.
Speaker 3 (35:57):
Yeah, I just love a pervy story me too.
Speaker 1 (36:00):
Kind of helpful.
Speaker 3 (36:00):
They have a really great forum too, where it's manned
by Atier stuff, and you can actually head in there
and post your question and be like, oh, theoretically if
I did this and did that hypothetically, yeah, like they
can't provide you personal advice, but you can kind of
ask generalized questions and it's coming straight from the source.
You know that it's correct because sometimes those clickbaity articles
(36:20):
that you see floating around at tax time.
Speaker 1 (36:22):
Yeah, like oh my gosh, did you know you can
claim your pridor handbag.
Speaker 3 (36:26):
I wouldn't take those as we're not going to take
those legitimately.
Speaker 1 (36:29):
I also think it's really important to check the Atier
website because each year in the lead up to tax time,
the ATO put out like a big statement and the
statement usually explains what they're targeting this year. Yeah, let's
use a recent example, so I think it was this
year they came out and said, all right, we're changing
the work from home claiming rules because during COVID, we
(36:52):
gave you guys a whole heap of concessions on what
you could and couldn't claim from home, and obviously we're
a little bit more lenient with that because lots of
people working from home. Now we're cracking down on that.
If you're claiming work from home, you're going to need
to back it up because we're probably going to audit
a heap of people in this situation. So it's nice
to just know where they're tightening up. Not so that
(37:14):
you can protect yourself even more, because you should be
doing the right thing in the first place, but it's
just pervy. It's good to keep her finger on the
pulse and stand good reminder. And also things that you
could claim last year might not be claimable this year,
so there might have been certain concessions or certain leniencies
that they're like, oh, well, Jess, we're going through COVID,
so you can claim this this year and then they
(37:34):
can't next year. So for example, there's an uproar in
the She's on the Money community this year because the
instant asset right off amount is actually decreasing next financial year,
or it has now decreased this year, whereas historically you
could claim a lot more on that. So you just
want to have your finger on the pulse, because if
you're going to make decisions financially, let's make sure that
(37:55):
you're not making them based on rules that don't apply
to you anymore.
Speaker 3 (37:57):
Yeah, so don't guess tax claims. We don't want to
be dancing with the devil, or in this case, the
tax man. Excellent advice.
Speaker 1 (38:03):
Oh hold on one more thing. Obviously I was saying
to you earlier, like, oh, yeah, I registered for GST earlier.
One of the additional benefits of registering for GST is
that you're able to claim it back. So if you're
not registered for GST JES, you're not able to claim
back the GST on any of your expenses or materials
that you purchased to sell. Okay, interesting, Just good to
(38:27):
know because you might go, oh, I claim that back
at tax time because you've heard that GST is claimable.
It's claimable if you're paying it. Yeah, so it's like
a two way street. If you're not on the two
way street, you don't just get to claim it when
you're not paying it.
Speaker 3 (38:38):
That makes total sense. Is there anything you want to
leave us with about bank accounts?
Speaker 1 (38:43):
Are you going to let me talk about bank accounts
in this episode to your favorite topic?
Speaker 3 (38:47):
Oh, this is my favorite episode.
Speaker 1 (38:49):
We don't even need the Sheese on the Muddy Podcast
as a whole anymore. We just need Victoria talking about
banking systems. So yes, obviously, always open a new bank
account for your business, whether it is big or whether
it is small, because it's going to help you keep
track of all of that money that is coming in
and going out. And I promise you are going to
want to keep track of that if you're registered for JSD.
(39:10):
Because obviously can't give personal advice, you could potentially think
about opening a separate bank account for that money to
go into it. I do that personally where you're not
going to spend it. I do the same for tax.
So while we said earlier we withhold thirty percent tax,
So like my business pays thirty percent tax, say ten
(39:30):
thousand dollars payment comes in, I automatically put three thousand
dollars into my tax account. H and I do that
because it makes me feel so comfortable. I go immediately,
if we pretend this was profit, I'm going to be
paying three grand tax on this at a minimum. And
then I take my JSD and pop that in a
separate account, and I know that I'm clean. I then
(39:50):
use the money that is left over, So the seven
thousand dollars left over, I leave that in my business account,
and that's what pays my bills. That's what keeps the
light on. Coming to tax time, I know that I
have the money set aside to pay tax. I pay
tax from that. My business accountant goes through everything at
tax time and then lets me know at the end
of the financial year what my true profit is. And
(40:13):
I like it that way, and it's honestly, I would
say a privilege to act that way, because I'm technically
putting aside a full thirty percent irrespective of what my
costs are, because, as you guys know, I have staff
to pay, I have rent to pay, I have overheads,
Like do you know how many subscriptions I pay for
like Photoshop and like podcasting apps. I cannot It's expensive
website management fees.
Speaker 3 (40:33):
Like we'll go through.
Speaker 1 (40:34):
All of these hidden costs of business at some point,
but like, I do not realize how expensive it is.
Side note Jessica, to have an edm ah, so to
have an email marketing platform, you go, oh, just sign
up for mail Chimp. And that's what I did when
I started chees on the money, just went straight to
mail Chimp.
Speaker 3 (40:50):
I was like, Slate, it's free. Do we love that?
Speaker 1 (40:52):
And you get to a certain amount of subscribers and
they're like, haha, it's paid to play, and you're like, oh, okay, no,
that's fine. I've got some subscribers, I'll pay and then
you get more subscribers. Anyway, back to the point separate
accounts because one, I like clarity, but two, putting aside
that money means that I sleep really well at night. Yeah,
knowing that there's money in an account to pay tax, there's
(41:13):
money in my other account to pay for my staff
and my team, and then at the end of the day,
we get to talk about profit once tax time comes
and goes. So I think it's really important to be
structured properly. And it might seem like a lot for
now because you're like the I have literally just started
my business. I earn like four dollars. You've got rocks
in your head, like, I cannot believe it. I just
(41:34):
went to sign up for this new business banking account.
It's going to cost me ten bucks, Like are you joking?
Ten bucks? And I haven't even made a profit yet. Yeah,
a promise that investment is worth it and getting it
right at the start is going to save you so
many headaches and also any questions from the tax man later.
Speaker 3 (41:51):
Yeah, and on a smaller scale, having that separate account
if you're doing all of your spending from that account
as well, it makes me really handy at tax time
if you're someone who maybe does lose their receipts or
forgets what they have and what they could claim. It's
almost like an itemized list of everything that you purchase.
So it's super duper handy, so easy.
Speaker 1 (42:10):
Your accountant and your book keeper at some point when
you have both of those are going to love that.
You're gonna love that more because you're not filtering through
Oh no, that was zoobreets. Oh that was me. Oh
that was you know me and sports girl.
Speaker 3 (42:21):
Oh, actually, that's a business expense. Start that one. Yeah,
like that's not helpful.
Speaker 1 (42:26):
That is not an effective use of your time. And
as a small business owner, you only have so much time.
We need to make the most of it, and having
a clean banking system is going to make it easier.
And justs onto that point of like, if you're someone
who loses your receipts, like Victoria Divine Years, you're going
to start an album on your phone and take a
photo of every receipt that comes in so that you
(42:46):
know that it's stored somewhere. That helps me a lot.
I mean, the ATO app actually enables you to upload
it directly, but like, I don't know if I want
to upload it right now, Like my accountant might go,
oh V but you know, work lunch only some of
it's claim But I just I like having it separately
so I can provide it all to my accountant. Yeah, separate.
(43:07):
But then also you can actually upload your receipts directly
to the ATO portal throughout the year to keep track.
Speaker 3 (43:13):
Of them here. That's also free. There you go. I
feel like we've covered a lot too.
Speaker 1 (43:18):
I feel like we've covered too much.
Speaker 3 (43:19):
It was a big episode.
Speaker 1 (43:20):
I am really sorry to all of the people at
the start of this episode that I might have got
hyped up when I said.
Speaker 3 (43:25):
This is a really.
Speaker 1 (43:25):
Sexy topic because it wasn't aware like, but I also
think being empowered in business, being on top of your numbers,
that is arguably very sexy.
Speaker 3 (43:35):
I completely agree. And now you know how to set
yourselves up for tax time without getting fined, without getting
in legal trouble, and hopefully without getting a headache, and
so your business groes exactly right.
Speaker 1 (43:43):
We love that. All right, Well, have a really good week, guys.
We'll see you next month for a Business Bible episode.
But as always, the conversation is going to continue over
on our Facebook group, the Business Bible, not She's on
the Money. We're going to keep that one separate because not.
Speaker 3 (43:58):
Everyone cares about business. That's okay, and that's all.
Speaker 1 (44:00):
Right, But we've found our niche and we love them hard.
Speaker 3 (44:03):
Yes, we do your our people.
Speaker 1 (44:05):
See you next time, guys, Hie.
Speaker 4 (44:15):
The advice shared on She's on the Money is general
in nature and does not consider your individual circumstances. She's
on the Money exists purely for educational purposes and should
not be relied upon to make an investment or financial decision.
If you do choose to buy a financial product, read
the PDS TMD and obtain appropriate financial.
Speaker 1 (44:33):
Advice tailored towards your needs.
Speaker 4 (44:36):
Victoria Divine and She's on the Money are authorized representatives
of Money. Sheper Pty Ltd a BN three two one
six four nine two seven seven zero eight AFSL four
five one two eight nine
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