Business Toolbox: Finance

Business toolbox: finance tips for electrical contractor businesses

As a small business, it’s essential you pay as much attention to the finances as you do to the tools. Here, our experts answer questions posed by electrical contractors, just like you.

Our Finance expert:

Tony Dimitriadis, Director at AD Partners

Q: Should I give my staff a Christmas bonus? If so, what’s the most tax-efficient way to do it?

Tony Dimitriadis, Director at AD Partners, says:

Giving your staff a Christmas bonus is a nice way to say thank you and will likely boost morale and staff retention whilst also encouraging increased productivity and commitment. What’s the most tax-efficient way to do it?

Cash bonuses

Cash is the easiest option, but there’s a catch. Cash bonuses are treated as regular wages, which means they’ll be taxed like normal salaries. This means PAYG withholding, superannuation, and even payroll tax apply. A $500 bonus might not feel like $500 in their pocket.

Non-cash bonuses

Non-cash bonuses can be more tax-efficient, especially if you keep them under $300.

Gift Cards: If you give a gift card valued at $300 or less, it’s likely to be exempt from
Fringe Benefits Tax (FBT). That’s because it qualifies as a minor benefit.

Christmas Parties: If it costs less than $300 per employee, it may also be exempt
from FBT under the same minor benefits rule—especially if you host it on your
business premises.

Superannuation contributions

Instead of a cash bonus, you could contribute to your employees’ superannuation. Contributions within the concessional cap (currently $30,000 per year) are taxed at just 15%.

Salary sacrifice

Offering salary sacrifice means they can redirect their bonus into their superannuation, which will also be taxed at the concessional 15% rate. Alternatively, you could salary sacrifice tech or tools for an immediate benefit.

In summary

For small bonuses, non-cash options like gift cards can help you avoid FBT. For larger bonuses, offering superannuation contributions or salary sacrifice can give your employees a tax-effective option. Giving your team a Christmas bonus can be a win/win outcome, if you do it in a tax-smart way!

* Please remember, this advice does not take into account your personal or business circumstances, is general in nature, and is provided for information purposes only. Please seek professional financial advice that’s tailored to your circumstances if you need it.

Our Finance expert:

Stephanie Roberts, Founder – The Minute Taker

Q: I need to manage my creditors more effectively. What tips can you give me?

Stephanie Roberts, Founder of The Minute Taker, says:

Budgeting for your proposed revenue The business’s incoming cash flow is reviewed on a weekly basis as it is the type of industry where last-minute bookings occur. Maintain a cash balance Just like a float that sits in the till of a retail store, every business needs to maintain a cash balance in their accounts to ensure that when an unexpected expense takes place, you have the funds available. Unexpected expenses could be anything from machinery breaking down to advertising costs on a slow week.

Pay your taxes and employees’ superannuation monthly

In today’s market, with higher-than-usual interest rates, you never know when consumer confidence may affect your business. I used to pay all of the superannuation and tax expenses quarterly, however, in 2023, I changed this to monthly as it gives me a more accurate snapshot of how much cash my businesses are holding and generating.

Be nimble

An ever-changing economy means that you need to ensure that you are running your business on a month-to-month basis. And by that I mean, ensuring that you know exactly what expenses you are incurring, not being afraid to question bills, understanding what has made your electricity spike up, and looking around to see if you can find a better deal on your security expenses, etc. Understanding your profit and loss statement is integral to knowing exactly what is occurring in your business on a daily basis and having the ability to reduce your overheads when they are no longer required.

Cash is king

When interest rates increase, business profits are eaten up. It is imperative that all business loans are paid off as quickly as possible to ensure that your profits can be redeployed to other areas. Having the cash available to try out new business processes, software, products, and even marketing initiatives means that you are always investing in your business’s future.

While adopting a cash flow budgeting approach may seem like a big step initially, it does result in reduced stress and a better ability to be nimble and plan for slower months when they occur.

* Please remember, this advice does not take into account your personal or business circumstances, is general in nature, and is provided for information purposes only. Please seek professional financial advice that’s tailored to your circumstances if you need it.