Business Advice

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Dylan Buchan
Gidgee
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Joined: Tue Jan 20, 2015 2:40 pm

Business Advice

Post by Dylan Buchan » Tue Jan 20, 2015 3:36 pm

Hi,
I've got a question for all those working in a small business. I've recently started a homebased operation in musical instrument repair and tuning. I do not sell any products only the service itself, but I've struck abit of confusion in regards to tax deductions. Obviously I order parts such as pots and tuning pegs, bridges and the likes in order to fix the instrument and then I charge the client a set price based on what it is. So... do I need to do a stocktake of all the parts I bought even though I'm not selling them. Or does it work more like office supplies like pens and paper clips?
Thanks :D.

simso
Blackwood
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Joined: Mon Apr 25, 2011 10:36 pm
Location: Perth WA

Re: Business Advice

Post by simso » Tue Jan 20, 2015 11:09 pm

Anything with a value of a couple of dollars or more individually needs to be stocktaked as far as the tax man is concerned, absolute pain in the backside,
Steve
Master of nothing,

Do your own repairs - http://www.mirwa.com.au/How_to_Series.html

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peter.coombe
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Re: Business Advice

Post by peter.coombe » Wed Jan 21, 2015 11:41 am

Firstly if your activities are in additional to a job, and the total turnover is less than $20,000, then it is not worth running it as a small business. Declare it as a hobby and forget about all about the tax implications and all the paperwork associated with a small business. If the annual turnover is more than $20,000 then you can claim any losses against other income, so it might be worthwhile. Under $20,000 turnover then you can't, you can only roll foreward your losses and offset the losses against future income. If you declare it as a small business then you can get an ABN number. An ABN number can be an advantage in some circumstances such as when selling via a music shop or if you want to set up a web site under a .au domain you will definitely need an ABN number. Note that if you do not submit a tax return for the business then the ATO will eventually take the ABN number away from you. If your turnover is less then $2million you do not need to do an annual stocktake. I have not done a stocktake since this rule came in quite as few years ago. All you need to do is to do one stocktake and use that for future years. If your turnover is more then $75,000 then you will need to register for GST, and that is a pretty good incentive to keep your turnover less than $75,000!

If you want to run your operation as a small business, the first thing you should do is to get an accountant, make an appointment and chat to them about what is required, and what they will need from you at tax time. This will make it much easier and cheaper when the time comes to do your tax return. Make sure you keep your business activities separate from your personal finances and keep a record of what goes in and out of the business. So, you will need a separate bank account and credit card for the business. I declared my activites as a small business 20 years ago, my other half is an accountant, and I used to work for the ATO, so I know about this stuff.
Peter Coombe - mandolin, mandola and guitar maker
http://www.petercoombe.com

Ormsby Guitars

Re: Business Advice

Post by Ormsby Guitars » Thu Jan 22, 2015 11:00 am

peter.coombe wrote: If your turnover is more then $75,000 then you will need to register for GST, and that is a pretty good incentive to keep your turnover less than $75,000!
:roll:

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ozwood
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Location: Newcastle

Re: Business Advice

Post by ozwood » Thu Jan 22, 2015 5:15 pm

Thanks Peter,

Very useful and informative .

Cheers,
Paul .

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demonx
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Re: Business Advice

Post by demonx » Sat Jan 24, 2015 6:49 am

Also, one thing that most newcomers overlook is insurance.

As soon as you register as a business, anything to do with the business is no longer covered under home and contents insurance. Business insurance will then be required and may cost you several thousand per year (I guess it will depend on the value of your workshop) in addition to your standard home and contents. Most insurers also will not touch you for fire/theft unless you also pay them for liability and indemnity insurance. So that will add to the cost also.

Stocktake: my accountant asks for a stocktake every year. Also requires a date for any tool/machine purchase over $1000.00, I think that is to claim depreciation. I keep an ongoing spreadsheet of all costs and it's just habit now to add a description and s date etc to each cell.

simso
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Re: Business Advice

Post by simso » Sun Jan 25, 2015 11:17 am

I have to do a stock take every year, my accountant asks for it, yes it is correct re the 20k, under that and you are a hobby and you cannot claim anything but then again you do not have to declare anything either.

Gst for earnings over 75k, is just part of life, it sucks, but that's business.

If you solely own and run a musical instrument repair business and live in the grey area between 20 and 75, it will be tough, remember this includes all the parts you have purchased and on sold.

You do yourself an injustice if you do not use an accountant, you will financially be worst of for it.

Steve
Steve
Master of nothing,

Do your own repairs - http://www.mirwa.com.au/How_to_Series.html

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