Click here to view our 2011 end of financial year newsletter
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10 January 2012
The new Personal Property Securities Act (PPSA) is going to affect most businesses and individuals and will significantly change the way in which we deal with personal property. This has significance in securing (and potentially losing) property in a variety of ways that are day to day dealings for many businesses – so is not something that can be ignored.
It is likely to come into effect as soon as 30 January 2012
To see if and how this will impact you, we suggest reading the following item - Are you ready for the PPSA - from Fox & Lawyers which provides a summary of the new provisions.
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The above is an extract from the publication “Your Knowledge” a newsletter service we have subscribed to as an additional resource
This Newsletter, of necessity, has dealt with matters of a technical nature in general terms only. Clients should contact us for detailed information on any of the items in the Newsletter. No responsibility for loss occasioned to any person acting or refraining from acting in reliance upon any material in this Newsletter can be accepted by any member or employee of the firm.
9 December 2011
Planning on making a voluntary HELP repayment?
If you have a Higher Education Loan Program (HELP) debt and plan to make a voluntary repayment (i.e. a repayment made above the minimum compulsory repayment threshold), you can do so at any time and for any amount.
You may receive a bonus for repayments that:
• are $500 or more, or
• clear your debt.
However from 1 January 2012, the Government will lower the HELP voluntary repayment bonus from 10% to 5%, subject to the passage of legislation.
So, if you make a voluntary repayment of $500 or more on or before 31 December 2011, you will receive a bonus of 10%. However a voluntary repayment of $500 or more received after 31 December 2011 will attract a bonus of only 5%
You will not receive a bonus on repayment amounts that exceed the balance of your account.
Also, as from 1 January 2012, the HECS HELP discount applied to up-front student contribution payments of $500 or more, will be reduced from 20% to 10%.
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The above is an extract from the publication “Your Knowledge” a newsletter service we have subscribed to as an additional resource
This Newsletter, of necessity, has dealt with matters of a technical nature in general terms only. Clients should contact us for detailed information on any of the items in the Newsletter. No responsibility for loss occasioned to any person acting or refraining from acting in reliance upon any material in this Newsletter can be accepted by any member or employee of the firm.
If customers prepay you for your services and are not entitled to a refund if they ultimately don’t take up the service, then a new court case opens the way for a potential GST benefit.
A large number of businesses, particularly those in the services sector, receive prepayments from customers for future services - in some cases these are deposits and in others, part or full payment for the anticipated service. Often the contract terms provide that there is no refund of the prepayment if, ultimately, the customer does not take up the service.
If this occurs, what is the GST position on the prepayment?
Historically much of the thinking was that, despite the fact that the service was not ultimately supplied, the prepayment would still be in respect of a taxable supply and the vendor would account to the ATO for 1/11th of the sale price. Certainly this is the ATO view.
However a recent case involving Qantas has raised doubts over this treatment. The case related to non-cancellable pre-paid airfares where the customer did not turn up for the flight. As they were not entitled to a refund of the fare, effectively Qantas received the consideration but did not make a supply to the customer. Qantas applied for a refund of the GST from the ATO on the basis that no taxable supply had been made. The ATO disagreed with the position and the matter ended up in court.
In September this year, the Full Federal Court found in favour of Qantas. The court ruled that the supply for which the customer made the payment was for air carriage – the seat on the plane to be taken to their destination. When this did not occur there was no taxable supply and hence no GST liability.
Applying these principles to other situations, you may need to look closely at the arrangements you have entered into with your customers and also the agreements or contracts covering the pre-payments they make to you. Where these agreements are that the service for which the prepayment is made is non-cancellable and there is no right of refund and if, subsequently, the customer does not take up the service and the prepayment is forfeited, you may have a similar situation to Qantas. If there has been no taxable supply then perhaps no GST is payable.
There are a lot of scenarios and supplies to which this could apply. Before you get too excited it is worth noting that the Commissioner has applied for leave to appeal the decision to the High Court. So, there might be more to come on this.
In the meantime, if you accept prepayments from customers, it might be worth checking how the situation lines up with the Qantas decision. You should take professional advice on this – the devil will be in the detail. We can review your position with you. Keep in mind too that there is a time limit on seeking GST refunds. You have 4 years from the relevant tax period. After that, even if you are entitled to a refund, you are out of time.
It makes sense to see whether you might have an entitlement and then, based on the advice you receive, give notice to the Commissioner of an intention to seek a GST refund. It is unlikely that the ATO will act on any requests until the legal position is finally resolved. Once they are on notice though, your position is protected.
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The above is an extract from the publication “Your Knowledge” a newsletter service we have subscribed to as an additional resource
This Newsletter, of necessity, has dealt with matters of a technical nature in general terms only. Clients should contact us for detailed information on any of the items in the Newsletter. No responsibility for loss occasioned to any person acting or refraining from acting in reliance upon any material in this Newsletter can be accepted by any member or employee of the firm.
Safe Work Week 2011 starts on 23 October and runs until 29 October 2011. It is designed to keep us up to date with the changes in Workplace Health and Safety laws in Queensland and across Australia and is also an opportunity to have a free
heart smart BBQ brekkie with Mal Meninga
In May, the Queensland Government was the first government to pass the Work Health and Safety Bill 2011 which will commence on 1 January 2012. The Queensland bill was largely modelled on the national model.
One of the key changes is that, under the Work Health and Safety Act 2011, officers of corporations and unincorporated bodies such as clubs and associations are required to exercise due diligence and proactively ensure that the corporation, club or association meets its work health and safety obligations.
Other important changes include
• the definition of “worker” now includes a contractor, subcontractor, and a person of a prescribed class. It includes a full time nanny employed in your home.
• the definition of primary duty now includes monitoring of workers' health and conditions at the workplace.
• the onus of proof is now with the regulator to establish the lack of due diligence
If you haven’t done so already, we strongly recommend you review the changes to the legislation and ensure that you are ready to comply when the law comes into force in the new year. You can do this by:
• visiting the Workplace Health and Safety Queensland website where you can read a full summary of the new act including the key differences between the Work Health and Safety Act 2011 and Queensland's Workplace Health and Safety Act 1995
• attending one of the free information sessions being held by Workplace Health and Safety Queensland
• using the benchmarking tool to assess your current position and access tips that will help you improve management of workplace health and safety
• using the safe work week tools which include ‘injury hotspots’ posters, video documentaries and discussion starters
• going to breakfast with Mal!
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This Newsletter, of necessity, has dealt with matters of a technical nature in general terms only. Clients should contact us for detailed information on any of the items in the Newsletter. No responsibility for loss occasioned to any person acting or refraining from acting in reliance upon any material in this Newsletter can be accepted by any member or employee of the firm.
As the requirement for the quarterly payment of superannuation guarantee (SG) has been in place for several years, we anticipate that clients now have systems in place to cope with this.
However, it is easy to overlook SG payments if you are employed by your own company or trust. It is important to note that a payment will be required by 28th October 2011, covering at least the SG requirement for the July–September 2011 period.
Clients who made an annual payment of their 2009/10 SG requirement in October 2010 may wish to make a similar payment in October 2011, covering the SG requirement for the full 2011/12 year.
The consequences of being late with any of the SG payments are that the payment becomes non-deductible and various other penalties arise. So please ensure your system is in place to make the required payments and contact us if in any doubt as to the amounts or timing of the required payments.
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This Newsletter, of necessity, has dealt with matters of a technical nature in general terms only. Clients should contact us for detailed information on any of the items in the Newsletter. No responsibility for loss occasioned to any person acting or refraining from acting in reliance upon any material in this Newsletter can be accepted by any member or employee of the firm.
The importance of a current will and business contingency plan becomes stronger each year your business becomes more successful. Yet many small to medium enterprise (SME) owners neglect to update their wills to reflect the current status of their business.
And a will by itself won’t be enough. You need a separate document spelling out what needs to happen with the business in the short term.
If you have not identified what you want done with your business, you’re not only risking business value but you’re setting up potential problems for the remaining family and other business stakeholders.
A will should identify what is to happen to your business assets. But for many small businesses where there is a primary individual who controls the business, the executor or the family may need more instructions about what should happen with the business in the short term if something happens to you. This is about preserving the business asset while it is being dealt with by your estate. A lot of business owners keep everything in their head – impossible to access when they are no longer around. Business value can dilute quickly if the business loses direction. Your customers, employees and beneficiaries are all at risk.
If you don’t have a current will, then your business will be dealt with as part of your general estate and subject to any claims that may be made. In a worst case scenario it could end up being owned or realised for the benefit of the government.
Many business owners either don’t have a will or may not have updated it; if your business has expanded then there could be several issues that you are leaving to your executors to guess the best outcome.
Ideally, your business should have good records and a contingency plan. These need to include identifying what all the assets are and where they are; the systems the business works with and how it operates; the business plan and what opportunities are currently being pursued; the budgets and forecasts on business and who is responsible for different parts of the business. You need enough information to allow someone to come in and pick up the pieces, as well as ensure that business value is not diluted.
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The same way SME owners wouldn’t want their children to miss out on their inheritance they shouldn’t risk their business to a similar fate. There will be a limbo period between the time an executor is appointed to the
time the business is either sold or passed down the management line. Instructions must be left for the management of the business as well as the executor. It’s important for the benefit of their beneficiaries. In most cases, they also want to make sure that staff and clients are looked after.
If you need assistance with any of the issues raised in this article, talk to us today.
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The above is an extract from the publication “Your Knowledge” a newsletter service we have subscribed to as an additional resource.
This Newsletter, of necessity, has dealt with matters of a technical nature in general terms only. Clients should contact us for detailed information on any of the items in the Newsletter. No responsibility for loss occasioned to any person acting or refraining from acting in reliance upon any material in this Newsletter can be accepted by any member or employee of the firm.
A recent media release by the Assistant Treasurer announced stricter and broader laws in relation to directors’ liability in paying employee entitlements.
The directors’ penalty regime has been extended to make directors personally liable for their company’s failure to pay employees’ superannuation guaranteed amounts (9% of the wage).
Furthermore, the ATO can immediately pursue directors who have not paid the guaranteed liability within 3 months after the due date.
To avoid being personally liable under the amended laws we suggest you ensure you pay the superannuation guarantee for employees within the required 3 month period after the reporting date.
Before becoming personally liable, there are other penalties the company could face.
If you don’t pay enough super contribution (9% of ordinary time earnings), don’t pay the super contribution by the cut off date, or don’t pay super to the employee’s chosen super fund you must lodge a superannuation guarantee charge statement with the ATO.
You will be unable to claim a tax deduction for the amount paid to the employees’ superannuation fund and on top of this, will be required to pay the super shortfall plus fees and the superannuation guarantee charge. The superannuation guarantee charge includes a 10% interest component, along with an administration component and possibly a late penalty.
Common mistakes made by employers when it comes to super
• paying insufficient super contributions for eligible employees
• missing the quarterly cut-off dates (28 October, 28 January, 28 April, 28 July)
• not understanding that, in some circumstances, super should be paid for contractors, even if the contractor quotes an Australian business number
• not keeping accurate records
• not passing on an employee's tax file number to their super fund
• not lodging a superannuation guarantee charge statement if they have not paid their employees’ super to the fund by the due date or have not paid the correct amount
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This Newsletter, of necessity, has dealt with matters of a technical nature in general terms only. Clients should contact us for detailed information on any of the items in the Newsletter. No responsibility for loss occasioned to any person acting or refraining from acting in reliance upon any material in this Newsletter can be accepted by any member or employee of the firm.
Standards and Poors has downgraded America’s AAA credit rating, local and international markets are volatile and easily spooked, picking changes in interest rates is more akin to crystal ball gazing, the carbon tax is coming, consumer sentiment remains tight and no one is feeling particularly confident.... Welcome to the 2011/2012 financial year!
Over the next 12 months business will be working with a range of domestic and external influences that will cause uncertainty. But these swings can be a benefit as well as a headache – but only for strategically sound businesses.
Most SMEs are well downstream from major economic triggers. We don’t cause the problems but are affected because of what is happening to larger businesses, the economy, and consumers. Some industries are more impacted than others.
Expecting business conditions to be ‘more of the same’ over the next 12 months is wishful thinking. If your business strategy is simply to turn up, work hard, and expect business to come to you then you are likely to be disappointed. If you have not already, it’s time to do something different. When business gets tougher, ‘me too’ businesses come under pressure. A ‘me too’ business is one that simply replicates what everyone else in their industry or sector does. You work on the basis that there is a consistent and proven formula and if you follow the formula everything should work out. Sounds ok in theory (and says a lot about human nature) however the problem is that you are doing nothing to differentiate yourself in your market. This lack of differentiation may leave your customers with no compelling reason to continue doing business with you.
Business, and in particular small business, needs to be more strategic. The objective needs to be more than carving out some market share but to create a sustainable business. This is where your business strategy comes in. Your strategy should set the direction for your business and allow you to carve out a sustainable position in your market. In a buoyant market you can survive without a strong business strategy; there is plenty of business for everyone. Turn up, work hard, and you will pick up some market share. The challenge in the good times is generally supply rather than demand.
In a volatile market, demand can be patchy and in some cases depressed. Everyone is chasing business and if you don’t have a clear business strategy then it is likely that you are trying to win business by chance or competing on price. Most SMEs are not equipped to compete on price. You don’t have the capital reserves or the economies of scale to compress your profit margins. Go too far and you can trade yourself out of business.
Developing a business strategy takes time and hard work. You need to understand your industry sector, your market, where the opportunities lie, and how you can differentiate your position in that market. It’s not easy but get it right and it will pay big dividends. As a starting point you need to identify what your current business strategy is. You should be able to clearly articulate it and write it down (in your head is not good enough). If you don’t have one then accept reality and start working on one. Your strategy should flow into your business plan and then be reflected in your operating and cash flow budget for the year. Typically, your business strategy will contemplate your end game – be it a sale of the business or some other exit event.
Good businesses always have a clear strategy in place. For the coming year it will be more important than ever; it will separate the successful from the strugglers.
1. Focus on the customer experience
What’s it really like dealing with your business? Do a blind test and see whether your business and your team really want customers and sales. For most businesses, you’re not delivering a product/ service, your delivering an experience.
2. What do your customers really want and can you give it to them and still make a profit?
Starbucks closed 61 stores in Australia by 2008 (73% of their stores). They misunderstood the sophistication of Australia’s coffee market and no amount of advertising was going to make us change our barista.
3. Solve the problem. What is it that your business does for your customers?
The more you can solve the problems they face and make life easier, the more likely it is that customers will choose you over your competition. It might be as simple as refining how customers choose and order your product, access to information that is valuable (think of the freight companies who offer freight tracking and schedules of a customer’s history) through to product development (online banking didn’t always exist).
4. Know your product
Do all of your staff know your product or service and do they know what to say about it? The business might seem simple to you but your staff might not naturally realise what needs to be done or said. Inexperienced or poorly trained staff are a huge turn off to all but the keenest customers.
5. Not everyone wants to be your friend
For many years marketers told you to develop a close relationship with your clients. As a result, everyone wanted you on their database primarily to market to you (almost zero value to your customer). There is no question that there is a value to having a tangible customer base. But realise that your customers are looking for different relationships with different businesses. Understand what it is they want from you and develop the relationship from there. If you make contact give them value - don’t just talk at them about your product.
Quote of the month
“Price is what you pay. Value is what you get.”
Warren Buffett
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The above is an extract from the publication “Your Knowledge” a newsletter service we have subscribed to as an additional resource
This Newsletter, of necessity, has dealt with matters of a technical nature in general terms only. Clients should contact us for detailed information on any of the items in the Newsletter. No responsibility for loss occasioned to any person acting or refraining from acting in reliance upon any material in this Newsletter can be accepted by any member or employee of the firm.
Most small business owners are pretty close to their business. For many, it is a major part of their life and the distinction between personal and business is easily blurred. This can also cross over to their financial affairs with business and personal finances being interrelated.
Some recent tax cases are a reminder of the risks you run if you don’t keep a sufficient separation between personal and business. Get it wrong and you can lose some valuable tax deductions. The main area of risk is for those that operate their business through another entity such as a company or trust. Maintaining this structural separation is quite common and often makes a lot of sense for asset protection purposes. But problems often occur when you personally incur an expense on behalf of your business and then seek to claim tax deductions for the expense.
The most common example of this is interest costs on borrowing.
Your business needs funding and the bank is reluctant to lend direct to your company but more than happy to lend to you. Or, you decide it would be better to borrow at a personal level because you can secure a much better interest rate. All of this makes sense so far. You are your business; what’s the difference whether the business borrows the funds or you borrow them and let the business repay the loan? The problem comes down to who is entitled to the tax deduction. If the loan is in your individual name you may want the tax deduction for interest paid at a personal level. You can only achieve this if there is a reasonable nexus between the interest incurred and income you derive from your business. And, simply earning salary or wages from the business is unlikely to satisfy this requirement. The Court’s position is that an employee is not normally required to provide funding for their employer, so the fact that you earn a salary from the business will not be enough. You need to show a clearer connection; this could be from dividends you are receiving (probably unlikely in the first couple of years of business life), directors fees, or the best evidence is where you have on lent the money to the company and are charging a rate of interest. In this case you would have both interest income and an offsetting expense.
If the loan is in your personal name also be careful about just having the company make the repayment and claim the interest deduction. Your company could run into Division 7A problems and trigger an unexpected tax outcome. Division 7A applies where payments, loans or debts by a private company to a shareholder have or appear to have been forgiven. The division treats these amounts as a deemed dividend to the extent that the amount represents a distribution of the company’s profits.
Another common risk area is business expenses claimed at a personal level particularly if you operate your business through a discretionary trust. Where your sole source of personal income is from trust distributions, you are unlikely to be entitled to claim any tax deductions for expenses incurred in earning your income. The reason for this is that as a beneficiary of your trust, you have no right to income until the trustee appoints that income to you at year end. You do not have an automatic right to the income. And, at the time you incurred the expenses throughout the year e.g., car expenses, you had no income. You simply had an expectation that the trustee would appoint income from the trust to you at year end. Unfortunately, that’s not enough.
The clear message is that you need to put some formality around arrangements where the personal and the business cross over. Yes, you and the business are almost one - but not from a tax perspective. Get this wrong and it can be expensive.
Why stop at art? What about collectors items - some fine wine perhaps? Or, a few antiques?
The answer is yes you can (as long as the asset is genuinely for retirement income purposes, not for your personal use now, and not acquired from a related party) but the Government is looking closely at what SMSF’s acquire and how those assets are managed.
Recently, the Government released draft regulations that will guide what and how SMSFs buy, sell, and manage collectibles. The regulations seek to ensure that trustees do not gain a benefit from those assets now. For example, you cannot hang artwork purchased by your SMSF on your wall at home or wear jewellery acquired by the fund. This is because the Superannuation Industry Supervision Act (SIS) requires that all assets acquired by a SMSF are used for retirement purposes only. If you are using the assets now, you breach SIS as the asset is not exclusively for retirement purposes.
Storage of collectibles owned by your SMSF will be a major issue as it will be important to show that you are not benefiting from the asset now – so no storing the asset at home or in the home of a related party. Nor can you arrange to lend the asset to a related party, even if the asset is being rented.
The regulations cover collectable and personal use assets include artwork; jewellery; antiques; artefacts; coins or medallions; postage stamps or first day covers; rare folios, manuscripts or books; memorabilia; wine; cars; recreational boats; and memberships of sporting or social clubs.
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The above is an extract from the publication “Your Knowledge” a newsletter service we have subscribed to as an additional resource
This Newsletter, of necessity, has dealt with matters of a technical nature in general terms only. Clients should contact us for detailed information on any of the items in the Newsletter. No responsibility for loss occasioned to any person acting or refraining from acting in reliance upon any material in this Newsletter can be accepted by any member or employee of the firm.
Employers whose employees make salary sacrificed super contributions (or other “employee influenced” superannuation contributions) are obligated to report these amounts on the 2011 PAYG payment summaries. Whilst these amounts are not included in the taxable income of the individual, they are used to calculate various tax offsets.
As this is a complex area of reporting we suggest that, if you have any doubts on how to complete the summaries, you contact us before issuing them to your employees.
Failure to report these amounts correctly can be a costly exercise to rectify in terms of time and money.
Click here for more information on reportable employer superannuation contributions.
A reminder to employers that, when preparing PAYG summaries, the value of any reportable fringe benefits must be shown on each employee’s PAYG summary.
We have previously forwarded a schedule of reportable fringe benefits containing details of these amounts to those clients for whom we have prepared a fringe benefits tax return.
Please note that there is no reportable fringe benefit when the value of the fringe benefit is reimbursed, as opposed to when fringe benefits tax is actually paid.
Please contact us with any queries.
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This Newsletter, of necessity, has dealt with matters of a technical nature in general terms only. Clients should contact us for detailed information on any of the items in the Newsletter. No responsibility for loss occasioned to any person acting or refraining from acting in reliance upon any material in this Newsletter can be accepted by any member or employee of the firm.
The flood levy will start to apply to taxable income derived from 1 July 2011. Individuals who have a taxable income over $50,000 in the 2012 financial year and are not exempt will be required to pay the levy.
You are exempt from paying the tax levy if you have received an Australian Government Disaster Recovery Payment, Natural Disaster Relief & Recovery Arrangement or the New Zealander ex gratia payment. To see if you fall in to one of the categories, click here
If you have received one of the above payments and the ATO estimates your taxable income in 2012 to be over $50,000 you should receive a letter from the ATO confirming your exemption status.
You need to complete a Flood Levy Exemption declaration form and give it to your employer in order to reduce the tax payments taken out of your salary (beginning on 1 July 2011). You will receive a prefilled declaration in the exemption letter from the ATO, or if you do not receive the ATO notification, you can download this form from the ATO website.
Even if you have received notification from the ATO, if you do not complete and sign the form and give it to your employer, your regular tax payments will include the tax levy and this will be refunded to you following lodgement of your 2012 income tax return.
Click here for more details and to download the flood levy exemption declaration.
If you are likely to earn over $50,000 in the 2011-12 tax year and you have not yet lodged your 2011 income tax return, you can vary your instalment payments down. If you have received the exemption notice from the ATO, the flood levy will be automatically excluded from your instalment rates.
If you have not received the ATO notification and do not vary your instalments, your PAYG rates will include the flood levy, and the overpayment will be refunded on lodgement of your 2012 income tax return.
From 1 July 2011, you must ensure the flood levy is withheld from payments made to employees who will have a taxable income greater than $50,000 in the year. You will either need to use the new tax tables from the ATO, or upgrade your payroll software for the new rates.
If employees lodge a flood levy exemption declaration, then you will not be required to withhold this extra amount.
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This Newsletter, of necessity, has dealt with matters of a technical nature in general terms only. Clients should contact us for detailed information on any of the items in the Newsletter. No responsibility for loss occasioned to any person acting or refraining from acting in reliance upon any material in this Newsletter can be accepted by any member or employee of the firm.