Davidsons Tax and Business Services Manager Daniel Neeson recently joined host Rob Cameron on 94.7 The Pulse to talk about small business taxation – how an accountant can help small business owners, what small business owners need to watch out for at tax time and some of the most common issues we see here at Davidsons. You can check out the audio recording or read the full transcript below. 

Rob Cameron: We are delighted to have Daniel Neeson from station sponsor Davidsons Accounting in the studio. Good morning, and welcome to your first outing on local radio.

Daniel Neeson:     Yes, thank you, I’m very excited for the opportunity.

Rob Cameron:     Well, we have a great relationship with your employer, who do a wonderful job – and have done for many years around Geelong – helping people’s individual finances and businesses roll on nicely. And the focus today is going to be on that business sector, which you’re involved in, but before we get into that interesting story, you’re like many people who come to our town from regional Victoria to go to Deakin University, fall in love and never leave. You’re another one!

Daniel Neeson:     Yes, it was a great little journey. I came down here, and the intention was always to move to Melbourne afterwards, but I came here for uni and fell in love with the town. It was a big town that still had the city vibes, and it was easy to get to Melbourne. It was a great little opportunity.

Rob Cameron: I guess your thoughts about Melbourne were based on career opportunities because the big city is where the action is. But Geelong probably provides enough of that now, as well as the lifestyle, and I’m tipping that it might have been more the lifestyle that got you.

Daniel Neeson:     Yeah, it was the lifestyle, it really was. And the opportunities – there’s certainly enough around the Geelong region. I don’t know if it was the desire to get to the big smoke, and then I realised all the hype probably wasn’t there. Like travelling up – I don’t know if that’s for me, travelling an hour or an hour and a half to get to your workplace if you’re commuting. It wasn’t for me. So I love it here. I really enjoy it.

Rob Cameron: As an 18-year-old going into uni and finance, did you see yourself being this type of accountant at this stage of your life, or did you grow into the role a bit?

Daniel Neeson:     Yeah, certainly, so in my family background, I’ve got a few accountants as uncles. And I was stronger at school with mathematics and whatnot. So, I guess that journey was an easy decision – like, I’ll start myself off there and see if it’s something that I really love. And I worked while I was at uni, did some stints with a few different accountants to get experience in different fields and industries, and I loved it. Then, straight out of uni, my first actual full-time employment was Davidsons. Maybe I was just blessed with that business, but I’ve never looked back, and I’ve loved it.

Rob Cameron:     The general image of an accountant is one who doesn’t have a great deal of personality and vibe. You’re clearly not that! So, the career and the image that went along with it, did that sit in the back of your mind when you were a youngster?

Daniel Neeson:     That is actually very, very funny. Just to jump around a bit, I’m also the chair of the CPA Geelong branch, and one of the big things I like to do there is change the perception. I think there’s a really bad perception that we’re boring old bean counters, but I don’t know. Back in Hamilton, I did some work experience with some accountants who were very fun people. And my uncles, they like to party a little bit, so they definitely have a different side. And then at Davidsons, we have a good time. There’s a nice social connection. The perception of the accountant can get quite bad, but I really want to change that.

Rob Cameron:     And interestingly, if you’ve got a business side of things, I think that’s where the image probably comes from, a bit straight down the line and very conservative in their thinking and personality. But I think in this day and age, personalities have become different – more vibrant, more outgoing, and I guess it’s changing the image. But businesses themselves have certainly changed and had to change with time. So, as a young accountant, as you still are, it must be a pretty exciting time to be involved with so much going on in the industry.

Daniel Neeson:     Yeah, definitely. And the business we’re in, we deal with small businesses, small to medium-sized businesses, larger ones – we understand the relationship is key, having a good relationship with our clients. So I want to be as authentic as possible and build that connection. One of our core values is trusted relationships. And so to have a trusted relationship, you have to be honest with who you are. So that’s something that we really, really push. Be yourself. Don’t follow the other trend of being cookie-cutter.

Rob Cameron:     We were talking off air about the model of small business, that it really should be cut down into so many different pieces because Carpenter Joe might employ one person, and that’s a small business, but so is someone in Moorabool Street who is selling clothes. Small businesses are quite diverse and different, and even their management has to be very different. So your skill set, if you say, well, I look after small businesses, you’ve really got to have a pretty good coverage of what’s going on in the world of finance.

Daniel Neeson:     Yeah, definitely. It is so broad. And turnover, some may turn over $60,000 for the year, and then others in the small business realm could be turning over $5-6 million. So they have different needs. Some need a sounding board of essentially a CFO, like I’m the chief financial officer. And then some just need some guidance on where basic trends are heading.

Rob Cameron:     Just to get absolute clarity, is there a cutoff inside the industry of when a small business becomes a large business? Is it turnover, number of people employed, or a combination of both?

Daniel Neeson:     It’s a combination. So there are pretty much those two factors plus another little factor. If you’re bordering over 2 of the 3, that essentially means that you tick over into the different things, and then you have more audits that need to happen, and you will get audited if you go over those parameters.

Rob Cameron:     Now, the key focus probably is taxation. Many thought that Australian Rules footy was Australia’s biggest sport. I reckon it’s tax avoidance or tax minimisation, as it’s called in accountancy, and it’s a pretty logical thing to do. If you’re earning money, you’re trying as hard as you can to keep as much of it as you can. In a business, you’ve got the business itself, but then your personal side, and you’re either drawing a wage or you’ve got a partner and you’re both drawing out of the business. So, trying to find the simplest, easiest and most comfortable way to minimise taxation, I guess that’s your major role in the business model.

Daniel Neeson:     Yeah, definitely. And it’s certainly one of our major things with the businesses and individuals we work with is that pre-30 June catch-up. So we really emphasise that.

Rob Cameron:     And we’re getting to that stage now where you really need to start preparing, I imagine.

Daniel Neeson:     Exactly, yeah. And it’s knowing potentially what is available. So, say, for example, small businesses now, you can buy equipment up to $20,000 like an asset, and you can write that off immediately. So that can make a big difference. If you’re a sole trader and your profit is around the $200,000 mark, you could buy an asset for $19,000, which could be potentially a tax saving of roughly $10,000, so essentially you’re only paying half.

I guess the key thing is that it’s all well and good to get to go and spend money, but you’ve still got to know that there’s an outlay, so don’t get caught in the trap of, yep, all right, I’m going to get a tax saving. I guess it’s want versus need; does your business need this to survive?

Rob Cameron:     So it’s a case of looking at it and saying, well, I don’t reckon we’re going to have an issue with spending or needing to pay more in tax. So we don’t really need to be trying to save more; we should focus on other areas. However, if you’ve had a really good year and are thinking, oh, we’re going to pay some tax here, maybe this is a good time to get the business ready for the next phase of its existence.

Daniel Neeson:     Yep, definitely. And it’s also what the business is ready for, and then from a personal perspective, another option is putting some additional super in and counting your superannuation contributions as a tax deduction, to get yourself ready for retirement. Still, you don’t have to be getting ready for retirement. It can be early days, and you just want to start getting that super fund ahead. So that’s certainly another option that people can explore, doing a deduction just before 30 June.

The other thing is catching up with clients now to make sure that they give themselves enough time to make these changes. For example, with your super fund, you don’t really want to contribute anything in the last week of June because although the funds may have gone from your account, they need to actually hit the super fund and be registered before 30 June. Otherwise, it potentially doesn’t count as a deduction until the following year. So it’s just being ready and conscious.

And also with the tax side of things is if there’s going to be a tax obligation, knowing what that is, just an approximation, so you’re not getting caught by surprise each time you do your taxes. If you can have a guide, then you can plan for that in the future and make sure that you’ve put aside funds that potentially weren’t put aside previously.

Rob Cameron:     I know that superannuation is one that gives a bit of assistance to someone who has a surge of income. I know you and I both come from an agricultural background, so we know that the farmer’s life goes up and down in a big way. So, some years you might be able to take advantage of taxation rules, but it’s important to know them. A family trust is another one that you can build to prepare a bit of a war chest to avoid a big surge in taxes. Managed deposit – what do they call it – managed deposit funds for agricultural people that you can put aside this year’s income and pay tax on it next year and when there’s possibly leaner times, all these little things that people probably don’t know about and hence the need with someone of your skill.

Daniel Neeson:     Yep, and another one is, with that family trust, having what’s called a corporate beneficiary, generally referred to as a bucket company. You can put money into the company and pay a lower tax rate than potentially going out to the individuals, knowing that if you do that, the funds need to remain within the structure and don’t come out to you personally. But that’s another example of capping where your tax limits are and making sure that you’re not paying an exorbitant amount of taxes when there are alternatives that could be sought.

Rob Cameron:     Now, the other thing that’s interesting at the moment, we have an election soon, and there could be implications, possibly this financial year, but more likely later on. And again, you would have an eye on what’s happening there because you’d really need to be moving quickly to advise your clients if there’s going to be some change, and is there anything that’s been flagged so far that’s getting your alarm bells ringing as to change?

Daniel Neeson:     Look, nothing. I think both sides are probably not releasing anything. They don’t want to scare people off with additional taxes. And I don’t think they’re going to go the opposite way by lowering any tax brackets or anything like that. That’s done – I think they’re just going to vary.

There are no major tax policies coming out at the moment that we’re aware of. I think if we go back five years, it was funny, and this probably counteracts what I was saying before, like boring old accountants. I actually enjoyed watching the budget each year when it came out because it’s like, oh, what changes are coming in?

I think last year and the year before, it’s been quite dull, with not many changes, which is probably not a bad thing for us because you know what you know and you don’t have to worry about trying to shift things around or do anything like that. And I think, I think that’ll be the same this year. And then, as you say, after that we might have some changes coming.

Rob Cameron:     I don’t go into as deep as you being an accountant, but my observation, and I could be totally wrong, but I would have thought for small businesses, it tends to be more of an issue around state government elections rather than federal. Some of those little taxes and changes, what’s been your experience with that?

Daniel Neeson:     Yeah, so from a state side of things, taxes are the real big money makers around the property side of things. So there are so many different property taxes at the moment, like land taxes and surcharges. So that’s one of the major things from the state government side. The other key state tax that’s probably applicable to small businesses is payroll tax. Thankfully, businesses in Geelong get a regional exemption, but I guess they’re the major taxes that play on the state side of things. So it’s probably more so the Federal Government that’s dictating the income tax, GST, and whatnot.

Rob Cameron: What are some of the non-negotiables, no matter what your small business model is? We are now getting into March, and the tax year ends on June 30th. What should people start to do now?

Daniel Neeson:     Yep, so regardless of which industry or business you’re in, one thing is making sure you’re separating your business funds from your personal funds. So, sometimes we have clients come in and they’ve got just one bank account that’s got all their business transactions going through, and then it’s also got all their personal expenditure – going to the pub, doing whatever it may be. And that’s completely fine. But what we try to help clients do is separate, get that division.

Rob Cameron:    It’s a simple way to do that (and I know a lot probably do it now) – there’s a business name and you’re part of that business, but you pay yourself a wage out of that. So all of your personal stuff is in that pocket, and then the business expenses look after themselves in the other area. I guess for an accountant, that’s the simple and easiest way to do it, because if you’ve got combinations, and I’ve certainly seen people in the past who have, it would be a nightmare to work it out.

Daniel Neeson:     It is, yep, 100%. So, for a sole trader, you go out on your own, you’re earning the income, so you have every right to it. You’ve generated it. But what we tell people to do is just transfer to a personal account. It can be a weekly amount, just a set amount, and that’s what they operate off.

A flow on from that is making sure that you’re putting aside your tax and your super. So, making sure that those obligations are not getting forgotten about as the funds come in and making sure that we’re not thinking all of this money is ours, because the government does come knocking. And if it’s not paid on time, they are getting more and more aggressive with their stance on how they go about collections. And they don’t want to be treated as a bank. One of the recent changes they’ve brought in is that you get charged general interest on your ATO accounts. Previously, that was a deduction, but the ATO said that going forward, any general interest charges that have been applied to an account are no longer deductible, which is really going to hurt some businesses that have got long-standing ATO balances.

Rob Cameron:     It’s been very helpful. I don’t have the worry of a small business, thank goodness, because I think it would be very difficult at this stage, but people like yourself are clearly necessary at organisations like Davidsons. And we will obviously talk about conflict of interest in that they are one of the wonderful sponsors of this show, and that’s the reason Daniel is in this morning, but it’s also very sound advice.

And if you’re thinking about changing your accountancy, or maybe if you’ve just started a small business and think, do I really have the right tools to get through this mire that I’ve walked into? Look up Daniel at Davidson’s. And you operate out of Fyans Street?

Daniel Neeson:     Yeah, West Fyans Street, a great little spot there, closer to everything.

Rob Cameron:     Well, great to have you in. I think you’re continuing to chisel away at that image of the accountants. You do actually have personalities.

Daniel Neeson:     Thank you.

Rob Cameron:     You do actually have a bit of fun and a big smile on your face. Hopefully, we’ll have you back in the studio, and we also hope that you’ve enjoyed the experience this morning. We certainly have loved having you in. Thanks very much for the chat.

Daniel Neeson: No, thank you. This has been great. I was nervous coming in, but no, you made it very, very easy to sit through.

**END**

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Disclaimer: The information provided in this article is factual in nature and objectively ascertainable and, therefore, does not constitute financial product advice. Importantly, the factual information that has been supplied does not take into account your personal circumstances, objectives or goals.