[AMA] I'm an Accountant

bemybubble on 20/05/2016 - 15:30
Last edited 20/05/2016 - 15:31

Howdy OzB Community,

Starting to slow down come EOFY and thought it might be a good idea to do an AMA. I am a professional accountant in public practice for over 7 years.

Must do a disclaimer though that none of my responses are to be taken as advice and you should seek your own professional advice to best suit your own needs and I won't respond to personal situations.

Have seen a lot in the last 7 years, I do not have all the answers but my experience and development is furthered by your questions!

Introduce Yourself

closed Comments

    • CheapskateQueen on 20/05/2016 - 23:59
      +1

      If what you're saying is true you should lodge an objection against the penalty and claim safe harbor because you exercised reasonable care but your registered agent didn't. You have to show you did everything right and gave him the info.

      • bemybubble on 21/05/2016 - 07:33

        Good point indeed. Objections in my experience are very easy to remit and your accountant should be batting for you on all fronts

  • airzone on 20/05/2016 - 16:41

    What's the dodgiest thing you have heard of a private tax accountant do?

    • bemybubble on 20/05/2016 - 17:00

      Good question. Embezzlement. Stealing by far is the dodiest/most illegal i've heard.

      • airzone on 20/05/2016 - 17:43

        How feasible is this:
        - Customer visits accountant with $1,000 worth of tax return material.
        - Accountant charges a fee $200, plus 20% of the return $200, gives customer $600 cash, and inflates the return to $10000 to be paid into accountant's account

        • bemybubble on 20/05/2016 - 17:43

          Hmmm you might want to rephrase that second point as i'm not following you on that one airzone?

        • airzone on 20/05/2016 - 17:52

          You have enough receipts to earn back $1000 on a tax return.

          The accountant will charge you $200 service fee and 20% of the return ($200 in this case). He will also pay the return up-front in cash to you. You walk out with $600 in your pocket.

          The accountant then falsifies the return paperwork and inflates the receipt values until there's $10k's worth of return and submits it. He has the ATO pay into his personal account. Accountant walks away with $10k - $600 for the return, and the customer takes all the risk.

          I don't know if it's even possible, but I heard someone had this happen to them and didn't realise until the ATO made him their bitch.

        • bemybubble on 20/05/2016 - 19:40
          +2

          @airzone:

          If any accountant is charging on the basis of refund then I will add that to my dodgy accountant story list…

        • 30Something on 20/05/2016 - 21:06

          @airzone:
          I have heard similar stories however years ago.. I have now if ATO noticed that money in not being refunded to tax payer then they flag transaction for review… Might be wrong though

        • CheapskateQueen on 21/05/2016 - 00:05

          @airzone:

          If someone is going to an agent that charges commission, gets paid upfront (which is clearly wrong) and let's the agent do whatever the hell they want, onus is on them. That's completely disregarding responsibly. It is akin to giving a blank cheque to someone and trusting they do the right thing and never checking whether they did or not. Too bad, so sad. It's their own fault.

          And yes this scenario has happened.

        • airzone on 21/05/2016 - 00:12

          @CheapskateQueen: It's inexperience in this case as he's quite young, and the agent is "family" and that's apparently very important.

          But this particular accountant apparently services a less than savoury clientele.

        • CheapskateQueen on 21/05/2016 - 00:44

          @airzone:

          Hmm the family thing implies a higher level of trust but what he did was the equivalent of signing a blank tax return.

          What did he think was happening with the commission and pre payment of tax refund? Did he think that was normal?

          Best case scenario he objects to penalty and interest and/seek remission. Be cooperative with ATO and work with the debt department.

          The only way out of paying the primary tax liability would be to show that the tax return was not a valid return. I.e it was fraudulently lodged. While he may argue that it was, the ATO view is that when you give the agent everything s/he needs, authorise him to receive the refund and essentially "sign a blank return" and accept the refund, it's an authorised return (more complicated than that. But in simple terms). It's basically text book example.

          A warning to everyone to ensure your notice of assessment is mailed to you directly and not the agent.

  • altomic on 20/05/2016 - 16:50
    +1

    Do you sail the Accountant Sea?

  • Dennis3003 on 20/05/2016 - 16:56

    Are you earning above the average "Australian income" (About over $80 000 net)? If so, how long did it take you to earn that much?

    • bemybubble on 20/05/2016 - 17:04
      +1

      In business for myself so this is harder to answer. In short though yes.

      Though the minimum wage for accountants is that set by the NES as there isn't an award for our profession. But entry level is always around the mid 40's but this varys obviously across the board.

      • ChillBro on 20/05/2016 - 22:49
        +13

        Bit weird for a gaming console to set minimum wages but what the hell do I know

        • theStinge on 21/05/2016 - 00:00
          +1

          I see what you did there

        • j5ive on 21/05/2016 - 20:01
          +1

          You would at least think they'd upgrade to a SNES seeing as how super is involved.

  • dasher86 on 20/05/2016 - 17:05

    What's the most annoying question you get asked other than 'will you do my tax for me'?

    • bemybubble on 20/05/2016 - 17:10

      "How much will I get back?"

      Open ended question.

      • dasher86 on 20/05/2016 - 17:24

        People generally see an accountants value on how much they can save in tax. Saving in tax usually mean a refund.

        • bemybubble on 20/05/2016 - 17:27
          +4

          @dasher86

          A perception all too common and hence why we tend to steer clear of individual returns. A tax agent is suffice enough for that like H R Block, an accountant looks at the bigger picture.

          If a client came to us and said we will base your value on our refund, we would show them the door…(and we have too). Accounting is more than the concept of saving tax, and as one of my clients said 'that is why you get paid the big bucks!' :P

        • gkc135 on 21/05/2016 - 13:26

          @bemybubble:

          that is why you get paid the big bucks!

          Tell the truth. How many times has a client said this to you? At what age would you have retired if you earned a dollar for each instance?

        • bemybubble on 21/05/2016 - 14:45

          Edit:

          As I said. 'One of my clients'. Not all

  • bemybubble on 20/05/2016 - 17:18
    +3

    I should point out as a general point for people. Do not spend money on the basis of a deduction but rather on the basis of need. I still laugh when the government announced the $20k ride off and people went out and spent $1 to save 20 cents :P

    • dasher86 on 20/05/2016 - 17:27
      +1

      A 20k ride off is like two Hyundai i30s racing right?

    • EyyBanane on 20/05/2016 - 17:36

      Have you ever bought anything off the 20% ebay deals?

      • bemybubble on 20/05/2016 - 17:44
        +2

        Yep. A coffee machine for the office. 20% off, claimed back the GST and claimed a deduction. Take that ATO! :P

        • Gotchas on 21/05/2016 - 09:47
          +1

          A coffee machine for the office? Is that meant to be a reply to the accountant jokes?

  • Drifta on 20/05/2016 - 17:26
    +1

    Does setting up a trust account with a couple of family members as the trustee and others as the beneficiaries allow you to move your income/assests to the beneficiaries on lower tax brackets and is this the only option of doing this?

    What are some of the common 'strcutures' accessible to ordinary folks and what sort of income range do you need to be in for this to be beneficial?

    • bemybubble on 20/05/2016 - 17:40
      +2

      Trust structures allow you to protect assets and income split to beneficiaries. Discretionary trusts allow you to do this in a manner that will best suit an optimal tax outcome but isn't the only option.

      People sometimes use companys or partnerships to help split income. But really depends what your trying to acheive. It's not a matter of just income range to justify a structure. For example I have clients with a single property in a trust purely for asset protection purposes. It cost him $2k to setup and $2k per year to maintain but for him it's worth every penny for what he is looking to do.

      I'm a big fan of trusts and thats my day to day structure I deal with for my clients. But sometimes it's a bulldozer when a shovel will do…

      • Drifta on 21/05/2016 - 00:38

        When you say asset protection - how protected is it? i.e if I start a small business and run it in to the ground / get sued, will my assets in the trust remain protected?
        If I have a partner as a beneficiary and we split, are those assets protected?

        how much more is the cost for setting this up as a pty ltd company as suggested below and Would a pty ltd company achieve greater protection?

        Thanks for your responses so far! Do you know of any resources where can I learn more about trusts, companies and so called 'structures'?

        • bemybubble on 21/05/2016 - 08:05
          +1

          First and foremost never have hard assets in an area that you operate. So you would never have a company or trust doing both.

          If I was going to sue a trust with a corporate trustee for example (and I should reiterate I'm not a lawyer and this would need to be confirmed by them in any case) then this is the steps involved as I understand:

          I would sue the trust for liability. If there is no assets then by right I can sue the trustee which in this example is a $2 company with also no assets. If unsuccessful then I can sue directors for trading whilst insolvent or negligence (and in our experience very hard to prove).

          That's why whoever we setup a trust and company for we make sure the director doesn't have any assets in the event of getting sued.

          The above strategy can be used as a tool for good. And also for evil unfortunately. It's like fire, use it the right way it will cook for you and keep you warm. Use it the wrong way and you could burn down a whole house…

          As for learning I posted in another response a couple of CCH books explaining a lot of this stuff very well. Hope this helps? Trusts are my forte :)

        • Drifta on 21/05/2016 - 14:17

          @bemybubble: Thanks mate, given me some great things to keep in mind. Potentially be looking to set something up in 6-12 months so will keep you in mind when I get to that position and PM you.

    • BartholemewH on 20/05/2016 - 19:36

      Why would you use individual trustees as opposed to a pty ltd company?

      • bemybubble on 20/05/2016 - 19:41

        Cost is usually the big one.

    • Chrotzo on 20/05/2016 - 23:08
      +2
      • Note that you "can" only distribute $416 income to minors after that it's not worth it.
      • in a trust you will have to distribute all your income otherwise it will be taxed at the highest rate, as opposed to company with its fixed tax rate.
      • Drifta on 21/05/2016 - 00:41

        Is there any way to get around the minors restrictions? I've heard stories of people distributing large sums to minors and i assume this is done with minimal tax?
        I imagine adults get taxed at the standard tax brackets?

        • bemybubble on 21/05/2016 - 08:07

          Depending on how old your children are and the activities your trust engages in you could always pay them a small wage as working income is taxed normally for minors. Just gotta be careful with how much because of work cover and super coming into the picture if you do too much!

      • bemybubble on 21/05/2016 - 08:05

        Correct. But there's nothing wrong with that

  • VOHAUL on 20/05/2016 - 17:36
    +1

    Hi, and thanks for doing an AMA!

    Are there any books or courses you'd recommend to Aussies regarding small business finance & tax?

    • bemybubble on 20/05/2016 - 17:42

      For sure!

      I highly recommend the CCH Australia Taxation Law books or Foundations of Taxation Law. I found it really useful.

      I studied at both deakin and the university of new england. The UNE offers 2 subjects of tax law and advanced tax law which are taught very well.

      Other than that the best learning i've had to date is experience and through professional development or questions pitched like the ones listed in this AMA

  • 2jzzzz on 20/05/2016 - 18:12
    +1

    Do you have a quick go to list of deductions that basically anyone can claim?

    As in

    $300 stationary no receipts
    $100 charity donations
    $150 laundry for uniforms
    $100 ppe sunscreen sunglasses etc

    What else can you claim up to with no receipts or log books?

    • knk on 20/05/2016 - 18:35
      +2

      It's a total of $300 with no receipts. If you have $301 you need receipts for everything if I'm correct.

      • kendo on 20/05/2016 - 19:17

        I confirm you are correct. Without receipt, max claim is $300

        • bemybubble on 20/05/2016 - 19:42
          +2

          If you have no other deductions, $300 with no receipts.

          There is also a rule that you can claim up to $200 worth without receipts for items under $10. i.e. stationary

  • Srdjan52 on 20/05/2016 - 18:12
    +1

    1.Wanting to get myself an investment property to reduce taxable income. How do I go about using my super to pay down the loan.

    1. Do I pay HECS on the reduced taxable income or the original?

    2. Can I get my employer to not pay tax/hecs/Medicare weekly and pay a lump sum before eofy.

    • Chrotzo on 20/05/2016 - 22:54
      • you cant really use your super to repay investment property under your name.
      • your HECS is calculated based on taxable income + reportable fringe benefits+ total net investment loss (which includes net rental losses)+ reportable super contributions + any exempt foreign employment income amounts.
      • if you have a negatively geared rental property, what you can do it to apply of PAYG withholding variation. ATO then will tell your employer to withhold based on your estimated taxable income taking into account your investment loss instead of your usual rate.
  • avinit86 on 20/05/2016 - 18:19

    I was an accountant for 7 years with a big 4 firm. I had my ca etc but couldn't stand the mundane work and obsession with fees and timesheets. I am now in another field and much happier which pays alot more.

    1. What keeps you motivated?
    2. Do you hire many graduates still?
    3. Do you see a long term future for accountants?
    • bemybubble on 20/05/2016 - 20:02
      +3

      My hat goes off to you for working with one of the big four.

      What keeps me motivated is my desire to help and see people succeed and enjoying the journey with my clients. Public accounting is a different beast to what you were doing. Every client is different and challenging in its own right rather than monotonous as people working for the big four describe to me.

      We are only a small firm so unfortunately can't cater for graduates. Which is a shame as I'd love to take one under my wing

      Long term I think there will always be a place for accountants. But I reckon our role will evolve more in the advisory field rather than 'on the tools' so to speak

      • avinit86 on 20/05/2016 - 20:27

        Good answer. Thank and good luck

        • Thenarrator on 20/05/2016 - 22:23
          +4

          Do you mind me asking what field you are working now?

    • zeckem on 21/05/2016 - 00:08

      where do you work now?

  • folken on 20/05/2016 - 18:20

    Hi bemybubble I'm looking at whether to see an accountant for mine and the Mrs taxes. Been doing them myself for the past 10 years or so. What's the income range that makes it worth it? What's a fair charge? We have the usual salary, dividends, child and work related deductions.

    • bemybubble on 20/05/2016 - 20:06
      +1

      Depends. Accountants/tax agents are good at pointing out deductions you might not realise you can claim. But unless you want direction with more than just tax then it's really in the eye of the beholder. From what you're telling me it seems you have a grip on what's happening…you could always see a tax agent to suss out if you've omitted anything and take it from there. Got nothing to lose but a few bob (which then you can claim ha)

      • folken on 20/05/2016 - 20:12

        Good point :) thanks!

  • Diji1 on 20/05/2016 - 18:25

    How do practice legal tax avoidance like all the wealthy people in Australia and legally pay no tax?

    • bemybubble on 20/05/2016 - 20:08
      +1

      Tax avoidance isn't illegal but why play with fire

      Plenty of legit ways of reducing your tax

    • Janko on 20/05/2016 - 21:54

      Wealthy people also pay a lot in advisory and service fees for the privilege. Off-shore companies and accounts for example, aren't cheap.

      • Diji1 on 20/05/2016 - 21:55

        They pay a lot for advice and fees.

        That makes it OK then.

        • bemybubble on 21/05/2016 - 14:51

          Never makes it ok I believe. They get paid big bucks for taking big risks

  • knk on 20/05/2016 - 18:30

    I operate as a sole trader (IT Support) and I've been doing my own taxes for the last 3 years mainly out of convenience / too cheap and lazy to find someone. This year I've turned it into a full time job.

    Am I right in the way I've been calculating my car expenses:
    Logbook method (12 weeks) showing 80% business usage.
    I take average fuel prices (from googling and take a screenshot of the source as proof / evidence) and calculate the cost of my kms per 3 month period from the odometer readings. I then write off 80% of that. I also write off 80% of everything else car related, servicing etc.

    It was a cheap car ~5k, below the threshold purchased outright and I also wrote off 80% of the balance of the car this year. Am I right to assume that when I sell the car, I should have to take 80% of that and show it as income + of course pay tax on it?

    Thanks!

    edit: Also a negative gearing question.
    My current home, which I've lived in for 3 years is likely to either end up sold or become an investment property tax wise depending on the tax implications. I've pulled some money off the loan and refinanced in the last few years around 10% of original the loan value.

    If I were to buy another place to live in, and then rent this one out would it be worthwhile? How would the private / asset portions of the investment be calculated and what percentage of the interest would be applicable to write off (I assume the full amount minus the money taken from refinancing?)? From my understanding once sold I would need to split the private / investment portions based on % and pay CGT on the investment portion of time?

    Thanks again!

    • darkchoc on 20/05/2016 - 18:49

      Sounds like you are seeking personal advice mate and need to hire an accountant!

    • MustacheFire on 20/05/2016 - 19:21
      +1

      On the neg gearing, you can rent out a property for up to 6 years and still treat as main residence (no cgt). See link

      But you will only be cgt exempt for one property at a time. So if you buy a second property, it's gain will be taxable for the period you claim cgt exemption for property 1.

      (I am not an accountant, this is not advice)

      • knk on 21/05/2016 - 10:20

        Yeah I need to see an accountant when the time comes lol. From what I understand it may be worthwhile to just sell this property and buy another solely as an investment.

    • No ONE on 21/05/2016 - 14:32

      Lol The way you claim car expenses, you really need to see an accountant.

      • knk on 21/05/2016 - 16:56

        Lol am I right to assume that I should be writing off the percentage of business use or am I doing something wrong.

        • CheapskateQueen on 21/05/2016 - 22:02

          You need actual petrol receipts not some random average price.

      • No ONE on 22/05/2016 - 00:58

        Patrol price does not work, mist have actual receipt of expenses. You as well need a log of travel. You can't just times 80% everything. There is a proper procedure and requirements for that.

        • Findmebargain on 22/05/2016 - 01:21

          I have read that there are 2 options allowed as substantiation for fuel costs, one being actual receipts and the other being "known fuel consumption and prices" so if @knk has used relevant independent sources as reference for his assumptions, I suppose he should be fine provided he kept a log book justifying the 80% business use as he mentioned?

          Quote
          Logbook method – also known as the actual cost method – include receipts of all vehicle expenses and a logbook. You need to establish the business use percentage by keeping a log book for a minimum of 12 weeks. In relation to fuel and oil costs you have two options, one is based on receipts and the other is a reasonable estimate of cost based on kilometres travelled and the known fuel consumption and prices. The logbook will enable you to establish a business use percentage. It is this proportion of the actual costs of owning or leasing and also operating the car which are deductible. A log book is generally valid for 5 years.
          Unquote

  • darkchoc on 20/05/2016 - 18:51

    What hours do you work and what is the largest source of business for you?

    • bemybubble on 20/05/2016 - 20:14
      +2

      8-5 but longer if need be. I try my best to have normal working hours to balance home life. Not easy to do with your own business

  • kendo on 20/05/2016 - 19:16

    I am not sure why i ask you. I graduated Accounting for a year, did one internship in Accounting company, but i am unable to get an accounting job, even for Junior Accountant. I am advance in MyOB and xero. I lost my confident in finding an accounting job.

    With your exp, can you tell me how i can get an accounting job. Starting from my resume? Thank you

    • bemybubble on 20/05/2016 - 20:22

      It's really hard and to be honest it's not about what you know but who you know.

      Join discussion groups with other accountants and try to befriend as many as you can. Take whatever experience you can get even if it's unpaid. This will give you the best chance to find something. Just don't give up…!

    • zeckem on 21/05/2016 - 00:11

      you should try voluntary work

    • knk on 21/05/2016 - 10:18
      +2

      Don't take this the wrong way or as an insult but maybe your English skills have something to do with it? Perhaps classes or some self education would help.

      If your resume is written in a similar manner to the above post I could understand if people just pass it by.

  • cucumber on 20/05/2016 - 19:37

    Do you give advice on smsf? If yes, what are you going to do once the accountant exemption expires on 1 July?

    • bemybubble on 20/05/2016 - 20:22

      We have our own AFSL so we are covered :)

      • cucumber on 20/05/2016 - 22:22

        Nice! Is there a lot of work involved with running an AFSL?

        • bemybubble on 21/05/2016 - 07:40

          There is and there isn't. We don't sell to clients ironically. Never have and never will. Which makes ours easy. We don't believe in commission on products as we are accountants not salesman (I know. Contradictory to someone having a full licence and is a fully qualified financial planner). So we outsource our compliance which makes running an AFSL easier.

          Note that the above is purely my opinion nothing more, not deliberately trying to ruffle any fin planners out there as they do serve a purpose, just not for us that's all

  • jmal4580 on 20/05/2016 - 19:43

    What is the most bizarre item someone has tried to claim against their tax return?

    • bemybubble on 20/05/2016 - 20:23
      +1

      A concreter tried to claim his wife's breastpump. Messed up **** right there

      • StewBalls on 20/05/2016 - 20:59

        I hope you told him to harden up.

        • retiredfeline on 20/05/2016 - 21:02
          +6

          Maybe he bought the wrong kind of pump.

  • UncleMurphy on 20/05/2016 - 19:48

    Here's a question on behalf my brother (a 20 year old commercial pilot). The company provides headsets for the pilots but they are inadequate - i.e. noise cancellation and have resulted in long term hearing problems for some veteran pilots. He has purchased a Bose aviation headset which has the proper noise cancellation (90% of all pilots within the company have their own privately purchased headsets).

    The headset was approximately $1500, will he be able to claim back the full amount? I read that this can be countered as an essential safety equipment for work or something along those lines.

    Thanks in advance :)

    EDIT: Also it was the cheapest headset which had sufficient noise cancelling available.

    • bemybubble on 20/05/2016 - 20:24
      +1

      Edit: Unfortunately as it relates to personal circumstance I cannot answer

      However I can tell you that if an item is required to assist in generating the income (nexus test) then it will be a deduction.

      • aragornelessar on 21/05/2016 - 01:03

        An extension of this question - if your employer provides a similar device, are you still able to claim it back if you decide to purchase a better/more appropriate one?

        • bemybubble on 21/05/2016 - 07:41
          +1

          The same answer applies irrespective

        • No ONE on 21/05/2016 - 14:41

          No you cannot claim anything provided by employer unless you paid for it.

        • bemybubble on 21/05/2016 - 14:54

          @Oz Bargain 3:

          Might want to re-read what he said. His employer provided it. But he still went out and purchased one

        • No ONE on 21/05/2016 - 15:11

          @bemybubble: Sorry my bad. But still I think he might be able to claim the he purchsed for work purpose.
          P.S. not intend to be in personal discussion.

  • dongerluo on 20/05/2016 - 20:01

    I must be too dumb to work this out myself. As a non-resident owning a property (paid off), if I get rental income it's taxed at 32.5c per dollar. But if I get a mortgage and save that amount of money in the bank, I only get taxed 10c per dollar withholding tax. Is that correct? It doesn't seem to make sense to me.

  • BartholemewH on 20/05/2016 - 20:02

    OP are you CA or CPA? Did you pick this yourself or was it suggested/dictated by a firm?

    • bemybubble on 20/05/2016 - 20:25

      I'm neither. IPA.

      I work for myself so no. Nothing dictated here…

  • [Deactivated] on 20/05/2016 - 20:27

    Why did you study accounting?

    Is it what you expected?

    • bemybubble on 20/05/2016 - 20:50
      +1

      Well. I originally wanted to get into IT. But then after work experience I thought stuff that and did accounting. I suppose it's a family business so it came very natural to me. Haven't looked back. It's everything I didn't expect and couldn't be happier

      • [Deactivated] on 20/05/2016 - 20:52

        Amazing :)

      • knk on 21/05/2016 - 10:23

        You made a good choice, I severely regret studying IT.

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