Home Forums Money matters Transition from Sole trader to P/L: FTB, CSA, Austudy

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  • #1080484
    BrisbaneKayaks
    Member
    • Total posts: 21

    Hi Matt,

    I’m sorry that I did not reply earlier, I was on holiday leave, and now back in action. Thanks for your advice and wisdom.

    No need to apologise for switching to counsellor-mode :) I appreciate it!

    I am seeing an accountant today to hopefully get all my questions answered.

    Thanks again!

    Julian

    #1080618
    BrisbaneKayaks
    Member
    • Total posts: 21

    Hi Matt,

    I’m sorry that I did not reply earlier, I was on holiday leave, and now back in action. Thanks for your advice and wisdom.

    No need to apologise for switching to counsellor-mode :) I appreciate it!

    I am seeing an accountant today to hopefully get all my questions answered.

    Thanks again!

    Julian

    #1080486
    JacquiPryor
    Member
    • Total posts: 2,344

    Hi Julian

    Just read this thread and would be interested if you could post an update from the meeting with your accountant?

    On a bit of a ‘side note’ – if you move forwards with the Pty Ltd it will need to register its own ABN I believe (rather than use the one you have as a sole trader), which will mean some updating to your records/paperwork etc and probably wouldn’t hurt to let any repeat customers know of the changes, as they may already have your ABN and business details recorded in their own accounting programs etc.

    All the best!

    #1080619
    JacquiPryor
    Member
    • Total posts: 2,344

    Hi Julian

    Just read this thread and would be interested if you could post an update from the meeting with your accountant?

    On a bit of a ‘side note’ – if you move forwards with the Pty Ltd it will need to register its own ABN I believe (rather than use the one you have as a sole trader), which will mean some updating to your records/paperwork etc and probably wouldn’t hurt to let any repeat customers know of the changes, as they may already have your ABN and business details recorded in their own accounting programs etc.

    All the best!

    #1080488
    BrisbaneKayaks
    Member
    • Total posts: 21
    JacquiPryor, post: 102399 wrote:
    Hi Julian

    Just read this thread and would be interested if you could post an update from the meeting with your accountant?

    Hi Jacqui,
    Sure, I’m happy to report my meeting with the accountant. However as of last night, I said the words I thought I would never say in my entire life – I give up.

    Anyway, I think the best way to report the information is by bullet point for ease!

    Before I go on, the accountant first of all came in late (appointment for 9am), he arrived 9.12am. I was there early. Then 15 mins into the meeting, his receptionist came into work, and he excused himself to talk with the receptionist. I could hear him asking her to get a coffee and two muffins and a paper. He comes back to the meeting with me and says “Sorry about that, three days back into work and it’s hard to get out of bed!” Throughout the meeting he was swearing in his speech which from that point onwards he lost all credibility with me. Words such as F***, S***, and B***h.

    Okay..

    He asks “So what is your business?” I replied, “I import kayaks from China and sell them and also sell water sports accessories. Things have gone better than expected!” He replies, “Hmm, not being negative, but kayaks… everyone imports from China, and it’s competitive. The big guys all import from China and eventually swallow the small guys, or the small guys cannot compete with the big guys. F***, the two shops next to us all import their stock from China. Not being negative mate. But I guess westpac and CBA all started somewhere, and you might be the next biggest richest person in this country, who knows.”

    That put me right off, and I’m not that easily discouraged. I think I have been living in a dream, and perhaps not thinking realistically. Money has been a big factor in injecting funds into the business as well since I’m working part time and doing uni. I guess the accountant was the straw that broke the camels back.

    * Sole trader to Pty Ltd: I must admit I didn’t know the benefits/disadvantages of doing this. The accountant said, stick with being an ST if you’re earning an amount say $50000/year (part time wages plus ST income), the tax rate will be 17% as opposed to 30% for company tax rate. Pty Ltd costs money every year in fees he said.

    * CSA/Child Support: I asked if there was a way I could put my child support into a separate account that the ex-wife could not use for her own personal use, and only used on school expenses or medical for the children. He said “Join the club like me mate and the other 600,000 who have to pay our profits to the ex. You can’t hide your money or lock it up. Put it this way, if you’re paying child support, means you’re making money. Just pay the b***h!”

    *FTB A & B: Yes, this will affect the payments as ST is calculated on your EOY income, that is wages plus ST taxable income.

    * Motor vehicle expenses: He said because I am not using my car much (apart from deliveries) I should just use the ‘cents/km’ method based on the engine size. He said, just because you start a business doesn’t mean you can claim a brand new car on a business because you feel like it.

    I asked him what I can claim as far as deductions goes, as that was one of my main questions I needed answered. He mentioned internet, phone, computer, power etc. But didn’t go into how much I could claim – that was disappointing even though I asked specifically. He said I wouldn’t be able to claim much because he assumed by working two days a week (part time work) plus uni meant I spent no time on the business or didn’t have many expenses. I actually spend roughly 20 a week on it as it is. But whatever.

    He then went back to the ST to Pty Ltd issue. “Back to the ST and Pty Ltd thing, get public liability or I won’t deal with you. That’s what I tell ALL my clients who are ST. It is important and you are stupid not to have it. You wont need Pty Ltd, just Public liability. You won’t be earning much anyway, so there is no point with a Pty Ltd.”

    After that, I was done. I concluded the meeting and paid my fee and left.

    Even though at that point of giving up, I went back home to call the ATO regarding depreciation and deductions. After spending 1.25 hours on the phone with them, I got all my answers I needed and cost me nothing. I guess I didn’t want to give up on finding that answer which I sought out to find. But after I sell the rest of my kayaks, I am done. The rest of the kayaks from now on is pure profit as I’ve received sales to clear my intitial outlay. So I’ll keep my profit and save it for a rainy day.

    All I can say is, nothing ventured, nothing gained. At least I tried!

    Cheers.

    #1080620
    BrisbaneKayaks
    Member
    • Total posts: 21
    JacquiPryor, post: 102399 wrote:
    Hi Julian

    Just read this thread and would be interested if you could post an update from the meeting with your accountant?

    Hi Jacqui,
    Sure, I’m happy to report my meeting with the accountant. However as of last night, I said the words I thought I would never say in my entire life – I give up.

    Anyway, I think the best way to report the information is by bullet point for ease!

    Before I go on, the accountant first of all came in late (appointment for 9am), he arrived 9.12am. I was there early. Then 15 mins into the meeting, his receptionist came into work, and he excused himself to talk with the receptionist. I could hear him asking her to get a coffee and two muffins and a paper. He comes back to the meeting with me and says “Sorry about that, three days back into work and it’s hard to get out of bed!” Throughout the meeting he was swearing in his speech which from that point onwards he lost all credibility with me. Words such as F***, S***, and B***h.

    Okay..

    He asks “So what is your business?” I replied, “I import kayaks from China and sell them and also sell water sports accessories. Things have gone better than expected!” He replies, “Hmm, not being negative, but kayaks… everyone imports from China, and it’s competitive. The big guys all import from China and eventually swallow the small guys, or the small guys cannot compete with the big guys. F***, the two shops next to us all import their stock from China. Not being negative mate. But I guess westpac and CBA all started somewhere, and you might be the next biggest richest person in this country, who knows.”

    That put me right off, and I’m not that easily discouraged. I think I have been living in a dream, and perhaps not thinking realistically. Money has been a big factor in injecting funds into the business as well since I’m working part time and doing uni. I guess the accountant was the straw that broke the camels back.

    * Sole trader to Pty Ltd: I must admit I didn’t know the benefits/disadvantages of doing this. The accountant said, stick with being an ST if you’re earning an amount say $50000/year (part time wages plus ST income), the tax rate will be 17% as opposed to 30% for company tax rate. Pty Ltd costs money every year in fees he said.

    * CSA/Child Support: I asked if there was a way I could put my child support into a separate account that the ex-wife could not use for her own personal use, and only used on school expenses or medical for the children. He said “Join the club like me mate and the other 600,000 who have to pay our profits to the ex. You can’t hide your money or lock it up. Put it this way, if you’re paying child support, means you’re making money. Just pay the b***h!”

    *FTB A & B: Yes, this will affect the payments as ST is calculated on your EOY income, that is wages plus ST taxable income.

    * Motor vehicle expenses: He said because I am not using my car much (apart from deliveries) I should just use the ‘cents/km’ method based on the engine size. He said, just because you start a business doesn’t mean you can claim a brand new car on a business because you feel like it.

    I asked him what I can claim as far as deductions goes, as that was one of my main questions I needed answered. He mentioned internet, phone, computer, power etc. But didn’t go into how much I could claim – that was disappointing even though I asked specifically. He said I wouldn’t be able to claim much because he assumed by working two days a week (part time work) plus uni meant I spent no time on the business or didn’t have many expenses. I actually spend roughly 20 a week on it as it is. But whatever.

    He then went back to the ST to Pty Ltd issue. “Back to the ST and Pty Ltd thing, get public liability or I won’t deal with you. That’s what I tell ALL my clients who are ST. It is important and you are stupid not to have it. You wont need Pty Ltd, just Public liability. You won’t be earning much anyway, so there is no point with a Pty Ltd.”

    After that, I was done. I concluded the meeting and paid my fee and left.

    Even though at that point of giving up, I went back home to call the ATO regarding depreciation and deductions. After spending 1.25 hours on the phone with them, I got all my answers I needed and cost me nothing. I guess I didn’t want to give up on finding that answer which I sought out to find. But after I sell the rest of my kayaks, I am done. The rest of the kayaks from now on is pure profit as I’ve received sales to clear my intitial outlay. So I’ll keep my profit and save it for a rainy day.

    All I can say is, nothing ventured, nothing gained. At least I tried!

    Cheers.

    #1080490
    BrisbaneKayaks
    Member
    • Total posts: 21

    Sorry, I should have mentioned I also spent a few hours to centrelink, austudy/NEIS and CSA, after seeing the accountant. I needed definitive answers.

    Centrelink: Because I work part time, if I were to start a small business, Centrelink need me to fill out a P&L statement every month for 3 months. They will then take an average of the sales after deductions and base the FTB A &B according the my current part time wage plus business income.

    CSA: They said if all combined income totals less than $20428/year, it falls into the Self-Support bracket, meaning no child support is payable to the ex-partner. CS is based on previous years tax return.

    Austudy/NEIS: I asked what if I quit my part time and go onto the NEIS scheme. They said, don’t do it as there are job seeking requirements and will interfere with your study. Plus, you cannot qualify for NEIS if you receive Austudy, and must receive an eligible income support payment from Centrelink, eg: parenting payment, which I do not receive. He said, just keep studying your degree, which means austudy payments and the two $1000 scholarship payments per year. You will be better off, instead of cutting certain benefits in hopes to create an income solely derived from starting a business.

    Funny thing was, I now remember the accountant telling me “Make sure you keep up with your uni study. Most people I find earning at least $60,000/year all have a degree.” Hmm, a hidden message perhaps? eg: give up your dreams and work for someone else, it’s easier.

    Anyway, that was another point that put me off.

    Cheers.

    #1080621
    BrisbaneKayaks
    Member
    • Total posts: 21

    Sorry, I should have mentioned I also spent a few hours to centrelink, austudy/NEIS and CSA, after seeing the accountant. I needed definitive answers.

    Centrelink: Because I work part time, if I were to start a small business, Centrelink need me to fill out a P&L statement every month for 3 months. They will then take an average of the sales after deductions and base the FTB A &B according the my current part time wage plus business income.

    CSA: They said if all combined income totals less than $20428/year, it falls into the Self-Support bracket, meaning no child support is payable to the ex-partner. CS is based on previous years tax return.

    Austudy/NEIS: I asked what if I quit my part time and go onto the NEIS scheme. They said, don’t do it as there are job seeking requirements and will interfere with your study. Plus, you cannot qualify for NEIS if you receive Austudy, and must receive an eligible income support payment from Centrelink, eg: parenting payment, which I do not receive. He said, just keep studying your degree, which means austudy payments and the two $1000 scholarship payments per year. You will be better off, instead of cutting certain benefits in hopes to create an income solely derived from starting a business.

    Funny thing was, I now remember the accountant telling me “Make sure you keep up with your uni study. Most people I find earning at least $60,000/year all have a degree.” Hmm, a hidden message perhaps? eg: give up your dreams and work for someone else, it’s easier.

    Anyway, that was another point that put me off.

    Cheers.

    #1080492
    Anonymous
    Guest
    • Total posts: 11,465

    Hi Julian,

    I am so disappointed for you that the accountant you met wasn’t more understanding about your situation and respectful of your enthusiasm, initiative and success to date.

    I can’t help wondering whether you’d be feeling like tossing the towel in if you’d had a better response from him, and I have my fingers crossed that this is still all going to work out for you somehow. Assuming that’s what you want?

    Good luck to you, and congratulations again on what you’ve managed to achieve under such difficult circumstances. I think it’s been very impressive :)

    Jayne

    #1080622
    Anonymous
    Guest
    • Total posts: 11,465

    Hi Julian,

    I am so disappointed for you that the accountant you met wasn’t more understanding about your situation and respectful of your enthusiasm, initiative and success to date.

    I can’t help wondering whether you’d be feeling like tossing the towel in if you’d had a better response from him, and I have my fingers crossed that this is still all going to work out for you somehow. Assuming that’s what you want?

    Good luck to you, and congratulations again on what you’ve managed to achieve under such difficult circumstances. I think it’s been very impressive :)

    Jayne

    #1080495
    BrisbaneKayaks
    Member
    • Total posts: 21

    Hi Jayne,

    Thank you for your supportive words. I think you’re right; I probably wouldn’t have given up if the accountant wasn’t blunt/unprofessional.

    I think because I’m studying a uni summer semester of corporate finance coupled with working and my children, it’s put a bit of strain on my emotions lately. So perhaps once my children go back to school, and I complete my exam, I should feel 110%!

    I’ve almost run out of kayaks, and will sit on the money for now. Though I feel rather ‘deflated’, I still feel a strong determination to make something of myself one day, that is, own/run a business and to which I hope creates copious amounts of time. For me, time=freedom, for which I can ‘spend’ on my children.

    Anyway I don’t want to get all philosophical; maybe I have already!

    Btw, I love this site! I should I say the community here make it fantastic :)

    Cheers and thanks!
    Julian

    #1080623
    BrisbaneKayaks
    Member
    • Total posts: 21

    Hi Jayne,

    Thank you for your supportive words. I think you’re right; I probably wouldn’t have given up if the accountant wasn’t blunt/unprofessional.

    I think because I’m studying a uni summer semester of corporate finance coupled with working and my children, it’s put a bit of strain on my emotions lately. So perhaps once my children go back to school, and I complete my exam, I should feel 110%!

    I’ve almost run out of kayaks, and will sit on the money for now. Though I feel rather ‘deflated’, I still feel a strong determination to make something of myself one day, that is, own/run a business and to which I hope creates copious amounts of time. For me, time=freedom, for which I can ‘spend’ on my children.

    Anyway I don’t want to get all philosophical; maybe I have already!

    Btw, I love this site! I should I say the community here make it fantastic :)

    Cheers and thanks!
    Julian

    #1080497
    AgentMail
    Member
    • Total posts: 1,741

    Oh my gosh Julian,

    I cannot believe that anyone, let alone a professional accountant would conduct themselves in that way!

    Is the business taxing in terms of the time it takes up, or is it just the initial outlay for the kayaks from China that is the issue. I think that perhaps you should reconsider giving up.

    By the sounds of it, you have got everything in place, done the hard yards and now have the benefit to start making some good money.

    If you feel at sea, perhaps seeking a partner to work with could help. Am happy to offer any assistance/advice I can, but don’t let a dodgy accountant ruin your plans

    #1080624
    AgentMail
    Member
    • Total posts: 1,741

    Oh my gosh Julian,

    I cannot believe that anyone, let alone a professional accountant would conduct themselves in that way!

    Is the business taxing in terms of the time it takes up, or is it just the initial outlay for the kayaks from China that is the issue. I think that perhaps you should reconsider giving up.

    By the sounds of it, you have got everything in place, done the hard yards and now have the benefit to start making some good money.

    If you feel at sea, perhaps seeking a partner to work with could help. Am happy to offer any assistance/advice I can, but don’t let a dodgy accountant ruin your plans

    #1080625
    interAccounts
    Member
    • Total posts: 125

    Hi Julian,

    Its a real shame to see you give up on your dreams just because of a shonky accountant. People like him shouldn’t be in business and they definately don’t deserve being paid. I hope this horrible experience hasn’t affected your ability to recall everything you’ve learned in your exam.

    From your initial post, it looks like your kayak business was profitable and was growing – its a shame to see something like that stop. Having your own business can give you much more family time than an employee – all depending on how you run it.

    Its definately viable setting up a Pty Ltd company – even if your turnover is less than $80,000 at the moment. There are a few legal ways of transferring the income from the business to yourself if its the best option.

    I’d highly recommend to reconsider your business venture once you’ve completed your exam and had a chance to breath. I’m not sure how many people are importing Kayaks into Australia, but it seems like a niche market to me, and therefore shouldn’t be given up on.

    In relation to finding an accountant, I’d suggest to have a look around and find one that suits you, make an appointment with a few different ones to ask one question (more to get to know how they think / operate). It may also help if you knew the answer beforehand – you’re then testing that they know their stuff. Bear in mind that tax accountants generally charge for the time you take so try to keep the meeting short until you choose the accountant that suits you. Once you’ve chosen an accountant that suits you, then go through all your questions with them.

    Hope this mess settles down shortly and you’re able to sort it all out.

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