I HAVE started a small cleaning business. My business partner and I are going to a free consultation with an accountant to discuss what we really need to know, and look out for. We will be doing our own taxes etc. But we are wondering if you can help us with some well-thought-out questions to ask. We have a few questions already, mostly about taxes. It's unsettling to know we could be missing some very important information. Your help is very appreciated.
TAX can be complicated, especially for a small business. Unless one of you is a practising accountant, I'd say you're going to have a tough time understanding tax law and using it to your advantage.
Using a free consultation as a guide might provide you with some insight, but let's be honest here you get what you pay for.
Professional accountants are paid to look at your personal and business circumstances and make recommendations that will get you the best results. By taking the process on yourself, you may be saving money in the short term, but you're likely to not get the best outcome for your business.
If you're dead set on this as a strategy, the first thing you'll want to talk to the accountant about is the structure of your business whether you're a sole trader, partnership, trust or company.
The structure will determine how the net income of your business is taxed. Assuming you're in a partnership as you say, you'll probably be looking at a 50/50 profit split and will be taxed on your share according to your individual marginal rates.
Another important consideration to discuss is GST as a small business if you're turning over more than $75,000 annually, you will be required to register for GST and prepare and lodge business activity statements with the ATO.
Record keeping is both a blessing and a curse for small businesses as it's a pain to maintain, but it can save you serious time and money when you're getting ready to lodge.
There are quite a few accounting software products on the market that can help you maintain your earnings and expenses, so ask the accountant which one they recommend for your business. If you're already using one, ask them if you're using it to the best of its ability.
Deductions can be confusing for a small business and sometimes there is a fine line between what can be considered a business expense and what is a personal cost.
A motor vehicle is a good example because there are many methods available for claiming a deduction for motor vehicle expenditure and each varies according to your usage.
Home office is another one if you have an office in your home where you handle bookkeeping and general business administration, certain running expenses can be apportioned based on the size of your office to your home and claimed as a business expense, but you have to ask to find out what you can claim.
From July 1, 2012, the small business instant asset write-off threshold has been increased from $1000 to $6500.
This means that the new industrial carpet cleaner you may have bought recently could be fully expensed in the year of purchase rather than having to write it off over its useful life. It would be a good idea to have a list of your equipment purchases handy so the accountant can advise on the appropriate tax treatment and depreciation rates.
Finally, if you and your partner have any employees or plan to take on employees, ask the accountant about superannuation guarantee legislation to make sure your business is compliant with relevant super rules for employers. While you're at it, find out how to calculate the appropriate rates of withholding tax that will apply to wages paid. There can be serious repercussions from the ATO if you're not remitting super and tax correctly.
This is some of the important stuff, but it's only the tip of the iceberg.
When it comes to business accounting and tax, a DIY job is risky and you could end up paying substantial fines if you get it wrong or miss out on opportunities to minimise your tax. Take this into consideration before moving ahead with your strategy.
Email questions to Larissa Ham at lham@fairfaxmedia.com.au
Frequently Asked Questions about this Article…
Do we need to hire an accountant or can we handle small business tax ourselves?
A free consultation can give useful direction, but a paid accountant will review your personal and business circumstances and may find tax savings you’d miss doing it yourself. DIY tax for a small business is risky — you could miss opportunities to minimise tax or face ATO fines — so weigh short-term savings against possible long-term costs.
How does my business structure affect how my small business is taxed?
Business structure (sole trader, partnership, trust or company) determines how net business income is taxed. For a partnership you’ll typically split profits (often 50/50) and each partner is taxed on their share at their individual marginal rate, so ask an accountant which structure best fits your tax and liability needs.
When must a small business register for GST and lodge BAS?
If your small business has annual turnover over $75,000 you must register for GST and prepare and lodge Business Activity Statements (BAS) with the ATO. Ask your accountant about GST timing, reporting requirements and how GST affects pricing and cash flow.
What record keeping and accounting software should we use for our small business?
Good record keeping saves time and money at tax time, and many accounting software products can track earnings and expenses. Ask the accountant which software they recommend for your cleaning business and whether you’re using your current package to its full potential.
What common small business tax deductions should we ask about (vehicles, home office, equipment)?
Deductions can be tricky: motor vehicle claims depend on which method you use and how you use the vehicle, home office expenses can be apportioned based on office size, and equipment purchases may be deductible. Bring details of usage and receipts so the accountant can advise what you can legitimately claim.
What is the small business instant asset write-off and how could it help our equipment purchases?
From July 1, 2012 the instant asset write-off threshold increased from $1,000 to $6,500, meaning eligible assets under that amount can be fully expensed in the year of purchase rather than depreciated over time. Have a list of recent equipment purchases (for example a carpet cleaner) to get specific advice on tax treatment and depreciation rates.
What do we need to know about hiring employees — superannuation and withholding tax?
If you employ staff, ask about superannuation guarantee rules to make sure you’re meeting employer super obligations and about how to calculate withholding tax on wages. Non‑compliance with super and PAYG withholding can lead to serious ATO repercussions, so get clear processes in place.
What are the best questions to bring to our free accountant consultation for a small cleaning business?
Ask about the best business structure for tax and liability, GST registration and BAS requirements, recommended accounting software, record‑keeping practices, allowable deductions (vehicles, home office, equipment), instant asset write‑off eligibility and depreciation rates, employer super and withholding obligations, and potential ATO penalties for non‑compliance. These topics will help you get practical, tailored advice during the consultation.
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