Is AssetAccountant™ Worth It?

AssetAccountant vs Excel
September 17, 2020
Posted by: admin

“I only have a few assets – is an AssetAccountant™ subscription worth it?”

Yes! Even for very small asset registers AssetAccountant™ saves time and money.

The comparisons below are a guide for you to compare with how you manage your asset register.

Feel free to crunch the numbers below replacing ours with your own numbers and estimations.

Whatever numbers you come up with yourself, and no matter how you manage your assets now, AssetAccountant™ makes depreciation easy for fixed asset accounting for even the most complex fixed asset registers.

** We’ve based the below example on a small register of around 5-7 assets currently using Microsoft Excel, posting depreciation journal entries monthly to benchmark accounting software such as QuickBooks Online.


Accounting vs Tax Depreciation – why do both?

Accounting Depreciation vs Tax Deprecation
September 14, 2020
Posted by: admin

Calling all Accounting Firms! AssetAccountant™ will save you lots of time preparing precise depreciation journals for your client’s FARs.

Many accountants prefer to maintain a single fixed asset register for their clients’ businesses. And, since tax depreciation tends to be much more aggressive than accounting depreciation, basing fixed asset registers solely on tax rules seems like a great choice.

For example, in Australia, the Tax Act permits the immediate deduction of 100% of the value of some assets.  Other assets can be depreciated aggressively in pools and by taking advantage of rules like Backing Business Investment accelerated depreciation.

Depreciating assets as aggressively as possible makes great sense for tax, but using these same rules for accounting has some serious downsides.

For accounting, your fixed asset register should reflect the value of an asset at any time during its useful life.  And the ‘cost’ of the asset should be spread across the asset’s useful life – allowing you to reflect the cost to use that asset to produce income in any given period.

But, aside from distorting the true value of assets to a business, depreciating too aggressively reduces the value of those assets on the balance sheet as well as reducing profits on the P&L – therefore undervaluing the business.  This can have significant impacts on a business’ ability to borrow, meet banking loan covenants, and sell the business at a fair value.

Keeping separate asset registers for tax and accounting ensures you can maximise taxable deductions for your client and maximise the value of the business on the balance sheet.

To see what we mean here, let’s consider a really simple example.

XYZ Gym Group decides to open a new gym on 01 July, 2019. They’ve leased a premises, purchased $250,000 worth of equipment and secured some foundation memberships.

As XYZ is a small business entity (SBE) for tax purposes and, as all of the equipment purchases were less than $30,000 each, XYZ is entitled to claim 100% of these expenses as a tax deduction in their first year.  So far, so good!

Let’s have a look at the financial statements for 2019/20.

The first thing that stands out is that XYZ ends up with a taxable loss of $192,082 carried forward for the year.  But, since they’ve used tax depreciation rules only, XYZ ends up with no capitalised assets on the balance sheet.  As they have liabilities in the form of creditors, GST payable, bank loans and loans from the owner, they end up with negative equity on the balance sheet.

This will have a significant impact on XYZ should they try to go to the bank to borrow, to open a second gym or to acquire more equipment for the existing gym.

What’s the alternative?  The typical useful life for gym equipment is 10 years.  So, from an accounting perspective, XYZ could depreciate these assets using the prime cost (straight line) method over 10 years.

Under this scenario, XYZ would depreciate 10% of the value of the equipment in 2019-20, leaving $225,000 worth of capitalised assets on the balance sheet and $25,000 in depreciation expenses on the P&L.

The result?  XYZ ends the year with positive equity and a small profit for the year.  This is both a more accurate reflection of the true value of the business, and puts XYZ on more solid footing with current and future creditors.

XYZ still has a taxable loss of $192,082 carried forward for the year, but has a much more positive case to present to a bank or a leasing company should they need to borrow for more equipment or to expand the business.  Win-win.

Hopefully, it’s pretty clear from this example that your approach to depreciation for tax and accounting can have significant impacts on your clients’ businesses.

Wouldn’t it be great if there was an easy way to manage tax and accounting depreciation side by side?

Enter AssetAccountant™.

AssetAccountant™ makes it easy to define the tax and accounting treatment of all of your fixed assets and provides a complete range of capital allowance depreciation methods for tax purposes.  These range from simple prime cost and diminishing value methods, through to Division 43, Luxury Motor Vehicle caps, Blackhole Expenditure and the new Backing Business Investment accelerated depreciation rules.

AssetAccountant™ automates treatment of Small Business pools, Low Value pools and Software pools, and will even recommend which assets are eligible for transfer to these pools.

All depreciation calculations are generated for you, and journals can be posted automatically to QuickBooks Online.

Our powerful import system makes the transition from Excel or other platforms easy – you can be up and running in literally less than a minute.

AssetAccountant™ can save you significant time in managing fixed assets, while giving you the confidence that you’re optimising depreciation for both tax and accounts.

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This tax time, are you confident your asset registers are accurate?

ATO targets fixed asset depreciation
April 30, 2020
Posted by: admin

Depreciating assets solely for tax (ignoring accounting) can significantly impact the valuation of a business. AssetAccountant™ handles both methods for the best of both worlds.

Each year the ATO identify and communicate tax risks to the market. The ATO make clear they will seek to understand and review the income tax treatment of activities, and “look for and review risks or concerns communicated to the market and determine if they are present”.

In the past year, the ATO has highlighted Fixed Assets (property, plant and equipment) as a Tax Risk.

The ATO has specifically flagged:

  • Incorrect application of effective lives,
  • Incorrect calculations, and
  • Accelerated depreciation

as areas of concern.

Uniform capital allowances – this is usually a large area of assurance for capital intensive Top 100 taxpayers as they own a high percentage of fixed assets (property, plant and equipment). We are seeing instances of the incorrect application of effective lives, incorrect calculations and accelerated depreciation. We also have concerns with the use of automated software where the outcomes may not be compliant with the law, the incorrect use of project pools, and the incorrect treatment of balancing adjustments on disposals. It is important that there are appropriate internal systems and good governance practices to record assets, and to calculate effective lives and depreciation. We will ask to see the tax fixed asset register and the working papers, and we will also verify original cost and adjustable values for high value assets.

Australian Tax Office
Interim Findings Report Top 100 Program

AssetAccountant™ helps ensure your compliance

  • AssetAccountant™ is a comprehensive cloud-based fixed asset register written by Accountants for Accountants.
  • AssetAccountant™ combines sophisticated interpretation of Tax and Accounting rules with modern user interface design, to greatly simplify the process of creating and maintaining fixed asset registers.
  • An AssetAccountant™ cloud subscription completely automates accounting and tax depreciation calculations for all fixed assets.

Priced to suit businesses and Accounting Firms of all sizes, AssetAccountant™ is currently available in Australia and New Zealand.

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