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Cashflow tip – Top ways to have better cashflow – 5 top tips

images/CashFlow.jpgOne of the top problems many businesses find a burden, is that cashflow can easily get out of hand , so what are some top ways to have better cashflow?

Several studies suggest that financial miss-management is one major contributor to business failure. Here are 5 tips to help get cashflow under control – remember it is an on-going monitoring that keeps you on top – measure and tweak, measure and tweak…!

  1. Look at who owes you WEEKLY – check your debtors/accounts receivable report every week – get onto those tardy payers – send Statements every Fortnight! A month is too big a gap and easy to slip the mind.
  2. Plan for highs and lows - Be aware of possible lean cashflow patches coming up and plan for them!. Avoid major purchases from your business’ working capital unless you are sure you have cash to cover it. A cashflow budget will help you see this – eg when revenue is down on forecast you expected (eg the average monthly required, or based on same time last year, or certain % growth if that is the current trend).
  3. Have finance products working to your benefit - Overdrafts, premium funding, lease facilities and cashflow funding products can all be excellent tools to help boost a business’ cash. Even the business credit card can be a good way to ease the squeeze as long as you are sure the debt can be paid before interest kicks in, which is the best way to handle credit cards!
  4. Avoid penalties -Keep on top of taxes and compliance to save the cost of fines… and the stress!
  5. Keep your hands out of the till - Make cash drawings for personal purposes as minimal and follow conservative cashflow forecasts. Take a weekly set wage for yourself so it’s easier for the bookkeeper/accountant, and gives stability to regular expenses and drawings so you can PLAN better!

Question? Email i This email address is being protected from spambots. You need JavaScript enabled to view it. or call 0407 361 596 Australia
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Business Tax Tip – Don’t get caught with Small Business Capital Gain Tax Concession thresholds

images/Business Tax Tips.PNGTerry Hayes, writing at Smart Company, warns that many SME businesses can get caught out by not knowing the Capital Gains Tax Small Business Concession rules. He has a link to another article with details, but in this one he writes…

...A fundamental threshold is the necessity to meet what is known as the maximum net asset value test (MNAV) in order to qualify for the concessions. Under that test, the value of all the CGT assets of the taxpayer, entities “connected with” the taxpayer, the taxpayer’s “affiliates” and entities “connected with” the taxpayer’s affiliates must not exceed $6 million. Such assets would include a debt owed to the taxpayer.

A recent case before the Administrative Appeals Tribunal (AAT) highlighted the importance of passing that threshold test and what is required to do so. It is one of the most fundamental issues that a taxpayer will confront when seeking to obtain the benefit of the small business concessions.

The AAT confirmed the Tax Commissioner’s view that a taxpayer failed the MNAV for the purpose of qualifying for the CGT small business concession because of a $500,000 capital gain he made in relation to the sale of his finance broking business.

The taxpayer argued that a debt of $1.1 million owed to a related entity had a nil value and should not be taken into account for the purpose of the MNAV test as it was “statute-barred” from recovery. However, the AAT found otherwise on the basis that the debt had been legally acknowledged as recoverable and legally in existence at the relevant time.

The taxpayer was a beneficiary (and trustee) of a family trust that held units in a unit trust which operated a finance broking business. The business was sold in the 2008 income year for a capital gain of $500,000 to which the taxpayer was entitled.

The issue in this case was whether the capital gain could be reduced or disregarded under the tax law, if the taxpayer and his related entities satisfied the maximum net asset value test. In particular, just before the sale of the finance broking business, did the sum of the net value of the assets of the applicant and his related entities exceed $6 million?

The taxpayer argued that, in determining whether the MNAV test was satisfied, a loan of $1.1 million made to him by the family trust prior to 1998 had a nil value and was not to be taken into account as it was “statute-barred” from recovery. In particular, he claimed that the family trust could no longer sue for the debt because of the six-year statute of limitation – where it had not sought repayment of the debt because it may have been used to repay a debt of another entity in the group that had become insolvent.

However, the AAT found that the fact that the taxpayer signed the balance sheets of the family trust for the 2003 to 2008 income years (in his capacity as trustee) was sufficient acknowledgment in writing that the debt was still legally in existence as an asset of the family trust in the year in question and it had a market value equal to its face value in the balance sheet records. The inclusion of the $1.1 million debt meant the taxpayer failed the MNAV and therefore could not reduce his $500,000 capital gain under the small business concessions.

The AAT also noted that the trustee of a trust has the authority to sign off on such balance sheet records as an agent of the trust (which the AAT found was equivalent to the situation where directors of a company sign balance sheets of the company in pursuance of their duty as directors).

That the CGT small business concessions continue to catch out taxpayers, for varying reasons, is some cause for concern. While it may be true that ignorance of the law is no excuse, the complexity surrounding these concessions still confounds many. May be its time they were simplified. No doubt the government’s Tax White Paper reform process will look at them.

What is your experience?

Need help? Not sure? Call for FREE 30min advice / strategy session today!

Call 0407 361 596 Aust and also get FREE“Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!

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Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software
Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software
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