ITM recently hosted a series of ITM LBP training days where builders were able to get a down-to-earth answers to some of the hard questions that commonly come up. Here’s a summary of our Top Accounting Tips for Tradies from Rowena Brown of Kiwitax.
Should I continue as a sole trader, or will I be better off forming a company?
Many small and medium sized builders have a spouse or partner who works in the business, helping with invoicing, GST returns, organising schedules and other support work.
If this is the case in your situation, forming a company and adding your partner as a shareholder can be a sensible way to save tax.
For example, the average salary for a part time administrator is approximately $22,000 per year. By allocating a sum like this to your partner, the personal tax you and your partner pay can be reduced significantly in certain situations.
How can I give my employees regular bonuses?
One simple solution is to use what we call a “Workplace Wellness Bonus”. This allows you to provide gifts to your employees (and yourself) of up to $300 every three months, tax free.
The most common method is to use gift vouchers. However, there are some exceptions to keep in mind. You cannot give vouchers for food or drink as these fall into the category of “entertainment” and are taxable, albeit at a lower rate than normal PAYE or other types of expenses.
Also, you can accumulate the quarterly $300 gifts and pay them in one lump sum of $1200 at one time, if you adjust for FBT annually, otherwise the gifts must be paid out in quarterly instalments.
Should I spend up before March 31?
There’s a common myth that if you buy an asset before the end of the financial year, it will save you lots of tax. Unfortunately, this is not always the case
Buying assets such as vehicles and equipment (over $1000) doesn’t immediately reduce your tax. You can claim depreciation on these items, but this happens over a number of years.
Buying your new gear before March 31 means you can claim a percentage of the depreciation in the following financial year, and if you have strong cash reserves in your company account, there may be some advantages.
But if you’re using your overdraft facility to make the purchase, then it could compromise your cashflow. The key is don’t run yourself short of funds thinking you’re saving tax!
Here’s a link to the original article from ITM
About Kiwitax – Award winning business improvement, tax and accounting service
Here’s the thing. As a business, rental property owner or start-up, you get a kick out of having your own gig. But chances are dealing with your tax and accounting leaves you cold. Good news! We love it, so hand it over to Kiwitax and we’ll look after it all for you.
Whether you deal with us online, by phone or drop into our Napier office, you’ll find a friendly, professional hardworking team ready to work with you, however you keep track of your financial information and from wherever you do business. And all for a fixed price. It takes just two minutes to get a quote.
Plus if you’re at a loss to know how to improve aspects of your business – from growth planning to cashflow management, even tax debt and so much more – we’re all over that too. Our Business Improvement Advisors can help you make a plan and put it into action.
Kiwitax are a preferred training provider for Business Improvement services through the Regional Business Partner Network Capability Voucher Scheme. This is a government funded scheme designed to boost business capability by providing funding of up to 50% of approved training programs with specified training providers up to a maximum value of $5000.
If you liked this article and want to make improvements in your business, with quarterly coaching sessions specifically tailored to support you to identify and achieve your business goals, lets chat!