Accounting for Psychologists Newsletter #15
The theme for this month is Spring Cleaning your personal finances. Spring cleaning is a big theme in my life right now as we are in the process of an internal restructure at Sheridans, and I’m moving house!
Regarding the internal restructure, I’m pleased to say that I will still be at the head of Accountants for Psychologists. My role will be welcoming new clients, researching and business & financial coaching. The Accountant for Psychologists Team of Olivia, Kristy, Sean, Sian, Zoe and Sandra will be looking after your tax returns and BAS statements. They are efficient and their technical skills in these areas are excellent.
I’ll also explain the Small Business Technology Investment Boost which gives an extra 20% tax deduction on spending related to technology. I hope you’ve been keeping your receipts.
In this newsletter
- Important dates for tax
- Small Business Technology Investment Boost
- Spring Cleaning your personal finances
Important dates for tax
|21 September 2023
||Monthly BAS lodgement due
|21 October 2023
||Monthly BAS lodgement due
|28 October 2023
||Quarterly BAS (July-Sept) due date if you lodge your own BAS
|28 October 2023
||Super contributions for Quarter 1 (July-Sept) due date
|31 October 2023
||Due date to lodge Tax return for 2022 - Only for late 2021 lodgers or self-lodgers|
Small business technology investment boost
The Small Business Technology Investment Boost was introduced on 23 June 2023. It's designed to help small businesses embrace digital ways of working by providing an additional 20% deduction for expenses related to business digital operations from the end of March last year until June this year.
What is the Small Business Technology Investment Boost?
Small businesses with an annual turnover of less than $50 million can deduct an additional 20% of the expenditure incurred on business expenses and depreciating assets which are purchased for the purposes of business digital operations or digitising the business’ operations. This includes things like portable payment devices, cyber security systems or subscriptions to cloud based services. And, yes, it includes your internet costs.
Who can claim this deduction?
Small businesses with an annual turnover of less than $50 million are eligible. It doesn’t matter if your business is a sole trader, partnership, company or trust.
What period does it cover?
The Small Business Technology Investment Boost period is from 29 March 2022 until 30 June 2023. That’s right, the time period has already finished. I hope you’ve kept your receipts.
You can claim for a depreciating asset if the asset was first used, or installed ready for use, by 30 June 2023.
Repair and improvement costs for depreciating assets (incurred during the time period) are also eligible for the bonus deduction.
How much can be claimed?
The maximum bonus deduction is $20,000 per income year, capped at $100,000 of expenditure per income year. Since the eligible period is across the 2022 and 2023 tax years, the maximum bonus deduction a business can claim is $40,000 on a maximum total of $200,000 eligible expenditure.
What expenditure qualifies for the boost?
The rules state that:
- The expenditure must be eligible for a deduction under another provision of the tax law.
- If the expenditure is on a depreciating asset, the asset must be first used or installed ready for use by 30 June 2023
- The expenditure must be incurred wholly or substantially for the purposes of the entity’s digital operations or digitising its operations.
- Where the expense is partly for private purposes, the bonus deduction can only be applied to the business-related portion
So, what exactly can I claim on?
The Small Business Technology Investment Boost is for expenses that are incurred wholly or substantially for the purposes of an entity’s digital operations or digitising the entity’s operations.
The boost covers all digital expenses not just new ones.
The ATO hasn’t made a definitive list of things that qualify for the boost and, of course, it depends on your business and how you plan to use the item. However, here is a list of examples that are given on the ATO website and in the Explanatory Memorandum which accompanied the new ruling.
|Digital enabling items
• Computer and telecommunications hardware and equipment
• Internet costs
• Systems and services that form and facilitate the use of computer networks Digital media and marketing
|Digital Media & Marketing
• Audio and visual content that can be created, accessed, stored or viewed on digital devices, including web page design
• Goods or services supporting digitally ordered or platform enabled online transactions
• Portable payment devices
• Digital inventory management
• Subscriptions to cloud based services
• Advice on digital operations or digitising operations, such as advice about digital tools to support business continuity and growth
• Cyber security systems
• Backup management
• Monitoring services
• Off-the-shelf cybersecurity software
• Smart phones and mobile data plans
|Data storage and subscriptions
• A cloud service to store client and sales data
• Software subscription fees
This list isn't exhaustive and it seems that most expenses relating to software will qualify. However, be cautious, locate all your receipts, and check with your accountant since the main criteria is that the spending must have a direct link to your business' digital operations.
The Small Business Technology Investment Boost does not cover:
The bonus deduction is not intended to cover general operating costs and specifically excludes expenses relating to employing staff, raising capital, the construction of the business premises, and the cost of goods and services the business sells. It also excludes training or education costs , although these may be eligible for the Small business skills and training boost which I’ll explain in detail in next month’s newsletter.
What about GST?
If your business is registered for GST and the expenditure is not GST-free, the bonus deduction is calculated on the GST-exclusive amount plus any GST you cannot claim as a GST credit incurred in carrying on your business.
There may be fringe benefits tax (FBT) consequences associated with the expenditure you incur.
How do I claim it?
For most businesses with eligible expenditure incurred between 29 March 2022 and 30 June 2022, you:
- claim the 100% deduction for this period in your 2021–22 tax return
- claim the 20% bonus incurred in this period in your 2022–23 tax return.
For eligible expenditure incurred between 1 July 2022 and 30 June 2023 you claim both the 100% deduction for the expenditure and the 20% bonus deduction in your 2022–23 tax return.
What about depreciating assets?
Small business entities generally can deduct the cost of a depreciating asset under temporary full expensing in one income year. Alternatively, you can deduct the decline in value of the asset over its effective life. It doesn’t matter which depreciation method you use, the bonus deduction is calculated as 20% of your expenditure on the asset.
What do I need to do?
Be sure to let your accountant know what you’ve spent on digital assets and subscriptions and technology for your business this year.
How to spring-clean your personal finances
Spring cleaning your finances can help to improve your financial health and set you up for success in the coming months. Here are some steps you can take to spring-clean your finances:
Review your budget:
Take a look at your income and expenses and see where you can cut back or make adjustments. My aim is to limit my number of streaming
services to two. It’s so easy to sign on to watch an event or a particular show and forget to unsubscribe.
Make sure to include all of your regular bills and expenses, as well as any discretionary spending.Here’s a link to the Sheridans Home Budget which can help you to monitor your income and your spending.
Organize your financial documents:
Go through all of your financial documents, including bank statements, bills, and tax returns, and organize them in a way that makes sense for you. In the past I had all my bills neatly filed in filing cabinets. Now that things are online, for some reason I find it a bit trickier to keep track of bills and statements so this Spring I’m going to make some electronic folders and check I’ve got everything up-to-date. The electricity providers keep a record of my previous bills, but if I change providers I might lose that data, and it will be harder for me to make my spreadsheets calculating how much money my solar battery has saved me. Feel free to ask me about my solar battery. It’s one of my favourite topics.
Evaluate your investments:
Review your investment portfolio and make sure that it is diversified and aligned with your risk tolerance and investment goals. This year has been a bit of a shocker for the share market. In my case, this year I’ll look at dividend returns on my shares and make sure that they are at a reasonable level, i.e. higher than a savings account. The share prices might not have gone up, but that won’t matter until I decide to actually sell the shares, so if the company still looks strong, I’ll hang onto it.
Get around to investing in shares:
If you haven’t invested before, there are some great micro investing options available that give you the chance to learn about investing in shares at a very low cost. You can start with just $5. Check out Raiz or Sharsies.
Set financial goals:
Take some time to think about your personal financial goals for the next 6-12 months. You might want to reward yourself with a holiday or set yourself a target to save for a home deposit. Whatever it is, make a plan to achieve it and set some deadlines so you have something to work towards.
Automate your savings:
Set up automatic contributions to your savings or investment accounts to make saving easier and more consistent.
If you're self-employed, the responsibility of contributing to your superannuation falls on your shoulders. While it is not mandatory, it's a decision that can really impact your future quality of life. It’s a great idea to set up a regular automatic payment to your super account.
Review your insurance:
Check your insurance coverage and make sure that you have the right amount and type of coverage for your needs.
I’m sure you have insurance for your home and contents, your car and maybe also your health. (Remember if your taxable income is over $90,000 and you don’t have private health insurance you will need to pay the Medicare levy surcharge which is 1.5% on top of the 2% Medicare levy that you already pay.
Some psychologist clients who have faith in the public system have found themselves purchasing private health insurance in order to avoid the Medicare levy surcharge which, depending on your income, can be a fair amount.)
Insurance prices don’t seem to ever go down. When I reviewed my car insurance, I found that, of course, it had increased, but also that the agreed value of my car had risen by more than $2000 apparently this was due to the hike in prices for second hand cars. Sometimes it’s worth checking if your car, home and contents are insured for a sensible amount as each year the company will increase the amounts automatically.
It’s a good idea to have a quick look at your health insurance and make sure it’s suited to your time of life. If you’re thinking about starting a family be sure to have the elements related to pregnancy and birth included in your health insurance. If you’ve been there and done that, it’s a good idea to check that you’re no longer paying for those items.
The other insurance that can make a big difference for the people you care about is Personal insurance. This is Income Protection Insurance, Total and Permanent disability insurance, Trauma Insurance and Life insurance. These insurances will give a payout if you are injured and unable to work or if you die. We all hate thinking about these things, but they are a safety net. Check if you are covered for any of these under your super fund or you may want to purchase a policy. In my Spring Cleaning I’ll check that the payout will cover the cost of my home mortgage, so my family won’t need to worry about debt if I were to die.
If you’d like more information about these types of insurance the financial advisors here at Sheridans are approachable, practical people who will give you sensible advice.
Check your credit report:
Review your credit report to ensure that everything is accurate and up to date. Look for any errors or fraudulent activity and take steps to correct them.
Your credit score is based on personal and financial information about you that's kept in your credit report such as the amount of money you’ve borrowed, the number of credit applications you’ve made and whether you pay on time. It also gives you a credit rating. These let lenders know whether to give you credit or lend you money.
If, like me and thousands of other Australians, you’ve been caught in a data breach, it’s a good idea to check your credit report as part of your spring clean. You can check your identity is safe and not been used to take out loans or apply for credit. In fact, if this is something you’re very concerned about you can request a temporary 21 day ban on your credit report, to ensure no unauthorised loans or credit applications are made.
Contact these credit reporting agencies for your free credit report whcih you'll receive online within 48 hours. Since different agencies hold different information, you may have a report with more than one of them.
When you get your credit report, check that:
- all the loans and debts listed are yours
- details such as your name and date of birth are correct
If something is wrong or out of date, contact the credit reporting agency and ask them to fix it. This is a free service.
For further information about becoming Financially Well Organised see my book Sorted.
It’s available online from you can order it online
Or pop in to pick one up at Sheridans on Anzac Highway and catch up with me at the same time.
Have a great month,
Fairuz and The Accountant for Psychologists Team