China-Australia Free Trade Agreement
Date: 2016-03-07
The Free Trade Agreement with China – Australia’s largest and most important trading partner – sends a clear message that Australia is indeed open for business in the AsianCentury.
Quiterightly,therewillbemuchback-slappinginCanberracelebratingtheofficialcommencementoftheAgreementon20 December 2015. This new flagship trade pact is Australia’s most important bilateral Free Trade Agreement and will create significant opportunities for businesses in bothcountries.
Make no bones about it – the deal with China is overwhelmingly in our national interest, and not just because goods will be cheaperoncetariffsareremoved.ThisAgreementisaboutjobsandnothinglessthanourfutureprosperity.
Thefactisthattwo-waytradebetweenourcountriesisalreadyvaluedatover$150billionandremovingorreducingtariffand non-tariffbarrierswillhelpAustralianbusinesses,includingourservicessector,bettercompeteforbusiness.
China's middle class is expected to expand by 400 million people, or more than 17 new Australias, over the decade to 2022. Even if the estimates are out by 50 per cent, there will still be millions of new middle class consumers – and an agreement to facilitate preferential access for Australiancompanies.
China's growth has fuelled Australia's prosperity. Its transition to domestic consumption is creating monumental new opportunities.IfourcountryistoremainrelevantastheAsianCenturyevolves,andifwe'recommittedtoprovidingjob opportunitiesforourkids,thenwemustourselvestransitiontomeettheevolvingneedsofthatmarket.
In China, the view on the Agreement is positive. New survey data from CPA Australia shows over 16 per cent of business professionalsinChinaexpecttheAgreementwillencouragetheiremployertoincreasetheirtradingactivityinAustraliaand eight per cent expect it will lead their employer to increase their investmentin Australia.
As a nation of 23 million people on the periphery of Asia, this deal is the classic no-brainer. Agreements like this are vital to unlockingthepotentialofmanyAustralianbusinesses,increasingourcompetitiveness,securingourplaceintheAsianCentury, and most importantly, creating jobs for thefuture.
China’s Economic outlook
Date: 2016-03-07
NewsurveydatafromCPAAustraliashowsbusinessprofessionalsinChinahaveapositiveoutlookonthenation’seconomy and are confident their own businesses will perform well in 2016, with policies that encourage innovation contributing to their optimism.
Theannualeconomicsentimentsurveyrevealsmorethanhalfofrespondents(56percent)expectChina’sGDPtogrowby6.5 percentormore,withrespondentsmostlikelytoexpecttheeconomytoexpandby6.5to6.9percent.
AlexMalley,chiefexecutiveofCPAAustralia,saysthesurveyresultsindicatethatChina’sbusinessleadersarecautiously optimistic about the yearahead.
“Despite slowing growth, China’s economy is still growing strongly and there is much to be positive about China in 2016 and beyond.
“Just over half of the respondents (51 per cent) declared some form of confidence in next year’s economy, while only 11 per cent were pessimistic. Further, 55 per cent of respondents expect the revenue they generate in China to increase in 2016 and 48 per cent expect to increase their headcount inChina.
“These results indicate that people in China increasingly understand that the ‘new normal’ economic growth rate is still very healthyandsignificantnewopportunitiesareemerging,particularlyforcompaniesfocusedoninnovation,qualityandoverseas expansion.
“Theresultsofoursurveyalsoshowthatpoliciesincreasingthefundingavailabletoinnovativebusinesses,providingtaxrelief for qualifying companies and improvements to regulation will support growth in entrepreneurship and innovation. The Government’sunveilingofChina’smajoreconomictasksfornextyearconfirmsthiswillcontinuein2016.”
Mr Malley said new market opportunities were also fuelingoptimism.
“Thereisrealconfidenceinaninnovation-ledeconomyandthepotentialofmarketexpansion,”Mr Malleysaid.
“The Belt and Road Initiative is significant as it will boost development of vital trade infrastructure like roads, rail and ports within Chinaandcreatenewopportunities forChinesebusinessesinemergingmarketslikeMyanmarandfurtherwestintoEurope.
“The China-Australia Free Trade Agreement is also important. This new flagship trade pact, which begins on 20 December 2015, will create significant opportunities for businesses in bothcountries.”
Is Financial Reporting Suffering From 'Hamster Wheel' Syndrome
Date: 2016-03-07
A review of the International Accounting Standards Board's proposed work plan for the next three to five years informs us of the key projects identified by the standard setter to improving financial reporting.
Broadly split into three categories of research, standard development and review projects, the proposals focus on analysing financial reporting problems and identifying potential ways to improve financial reporting or remedy deficiencies.
Fortunately, the IASB's process for standard setting is very open and receptive to suggestions from stakeholders on how they should progress their role as the primary global accounting standard setter.
Our view is that while working on known problems is essential, it is also a somewhat reactionary approach to standard-setting. The IASB's work plan and strategic outlook would benefit hugely from developing and introducing a more proactive and aspirational set of objectives for improving financial reporting.
It has been almost a decade since International Financial Reporting Standards (IFRS) came to be accepted as a global platform for financial reporting by listed corporates. The IASB has done a truly commendable job in developing and promoting the IFRS framework, with more than 100 developed and developing economies adopting it for financial reporting by listed companies within their jurisdiction.
Many of the fundamental principles within IFRS predate the framework, having been previously established as the generally accepted norms for accruals based accounting and financial reporting. The IASB has made and continues to make significant changes to the IFRS framework to address identified areas for development. Recently introduced standards on financial instruments, revenue and leasing reflect this approach.
The IASB is obliged to take on board feedback on suitable projects from different stakeholder groups including investors, financial analysts, financial report preparers and corporate regulators. Sector-specific and jurisdiction-specific issues can also have an influence on the projects identified for further consideration by the standard-setter.
Needless to say the IASB has to prioritise the numerous proposed projects against the scarce resources at its disposal. However, the IASB is in a prime position to develop financial reporting beyond its current form - fit for the future. After all, as accountants we have been used to financial reports as they currently appear for many decades now, and it is time to challenge the status-quo.
While dealing with problems within the current framework of accounting standards is necessary, identifying initiatives that challenge the status quo is even more necessary.
We are said to be on the threshold of what is being touted as the fourth industrial revolution, characterised by smart technology, machine intelligence, significant processing power and access to knowledge. Sadly, financial reporting appears not to have even caught up fully with the third industrial revolution, characterised by information technology and electronic media. Financial reporting remains entrenched in delivering information through paper-based media, and the attendant accounting standards are largely developed to meet the needs of financial reporting in that current form.
To its credit, the IFRS framework has embraced technology to some extent with the development of taxonomies to allow financial reporting using the eXtensible Business Reporting Language (XBRL). However the take up of XBRL-enabled financial reporting in IFRS-based reporting has largely been limited to those jurisdictions that have mandated XBRL-based financial reporting.
The accounting profession is sometimes accused of adopting an inward looking approach to financial reporting and accounting standards, and the approach and content of the IASB's recent proposed work plan appears to back this up. This approach has to change if we are to transform and evolve financial reporting beyond its current limitations.
At its core, financial reporting is about providing valuable information to users. This is a surprisingly challenging concept. Have we recently identified the actual users and asked them whether this is the case? An emerging view suggests there is a real need for new empirical research to answer this question. While instinctively it is hard not to see technology playing a part in the evolution of financial reporting, we would be in a better position to determine how information on corporate performance should be packaged and delivered once we have a clear picture on who the users are and what information such users really want and value.
The IASB is well placed as the global leader on financial reporting to obtain empirical evidence on the usefulness of financial reporting in its current form and what should be done in evolving financial reporting to the next stage.
Survey: Aussie small businesses least innovative in Asia-Pacific
Date: 2015-12-05
Newsurveydatafrom CPAAustraliashowsthatoursmallbusinesseslagwellbehindtheirAsiaPacificcompetitors when it comes to innovation, e-commerce and social media – all future drivers of growth and jobcreation.
The findings follow extensive surveying of nearly 3,000 small business operators in Australia, Indonesia, China, Malaysia, Vietnam, Hong Kong, Singapore and New Zealand as part of the upcoming Asia Pacific SmallBusiness Survey2015.
CPA Australia chief executive Alex Malley says the results show that we are being comprehensively outpaced by competitor markets in the region - and underscore the critical importance of the Prime Minister’s ‘innovation statement’, to be handed down onMonday.
“Malcolm Turnbull is absolutely right to draw a link between Australia's future prosperity and our ability toleverage innovation to improve our country's international competitiveness,” Mr Malleysaid.
“We’ve found that when it comes to innovation, applied at the coalface of small business, we arebeing outperformed by a significant margin by our competitors in Asia and NewZealand.
“Yes, there are some very innovative Australian small businesses, however they are unfortunately the exceptionto therule.
“Innovation must become the rule rather than the exception, and must be applied across the community – from universities and research institutes through to small businesses. That’s the definition of a ‘culture’ of innovation.
“On the key measure of innovation, looking at the percentage of small businesses that will introduce a newproduct, service or process in the next 12-months that is new to their market or the world, for Australia it’s only five per cent compared to Indonesia’s 46 per cent. China (32 per cent), Malaysia (29 per cent) and Vietnam (26 per cent) all scored highly oninnovation.
“Another key indicator is social media, used by 93 per cent of businesses across Asia, but only around 50 percent of Australian smallbusinesses.
“We’re lagging when it comes to e-commerce. Across Asia, 83 per cent of small businesses generate revenuefrom online sales, while here, little more than a thirddo.
“Looking ahead, more than 40 per cent of Asian small businesses expect to grow their e-commercepresence, while only 8 per cent of Australian small businesses have suchplans.
“This new data provides a baseline for our performance on innovation upon which business, governmentsand researchers should aim toimprove.
“The challenge for the Prime Minister and his Innovation Minister Christopher Pyne will be to use theinnovation statement to outline concrete initiatives to genuinely enhance our innovative capacities and our appetite for embracingtechnology.
“The introduction of the crowd-sourced equity funding Bill this week is a welcome development, an innovation for business which is a natural accompaniment to the digital age and frankly can’t come soon enough. Should itpass,the Bill means we’ll have a new way of linking entrepreneurs and their ideas with global investors to help getnew products and services off the ground and around theworld.
“The Government appears to be genuinely committed to making a serious and sustained contribution to creatinga 'culture of innovation'. This culture around a preparedness to embrace change and adopt new technologies is as important to university researchers as it is to the two million small businesses that in many ways represent the economic engine room of oureconomy.”
SMALL BUSINESS A WINNER BUT BUDGET FAILS ON A VISION FOR AUSTRALIA
Date: 2015-05-12
Despite the positive announcements in tonight’s budget for Australian small business, it is not clear from the fine print that the government has delivered on a vision for Australia’s future.
CPA Australia’s chief executive Alex Malley said that “tonight’s budget lacks a real vision and commitment to the serious and overdue structural reforms that are desperately needed to secure Australia’sfuture.”
“It’s evident that the Government has been spooked by the negative reception it got from its firstbudget.”
“When the focus of a budget is on minimising how many people you offend, you know it is not about charting a course for the country’s future prosperity,” Mr Malleysaid.
“Still nursing the wounds of its first bruising budget process, where a number of key reforms were rejected by the community and the Parliament, this time around it appears the preference is to be a small target and to please as many people aspossible.”
“Minimising bad news isn’t good news, especially when the challenges for our country aresignificant.”
“Australian business and the community are desperate for a boost in confidence and certainty – unfortunately there are only a handful of initiatives announced tonight that assures me that we’re heading in the rightdirection.”
“The only real highlights tonight are the positive announcements for Australian smallbusiness.
“Minister Billson should be applauded for leading on the package of initiatives designed to supportsmall businesses, and help them invest and createjobs.”
“Conversely, while the big ticket item of childcare reform is important, there are real questions over itsfunding.”
“There has to be a level of courage and conviction to tackle reform. It is what we expect from our political leaders, yet following the trauma of last year’s budget, this Government appears to have lost itsnerve.”
“If the government is uncertain, how are families and businesses expected to have the confidence needed to invest in jobs and grow theeconomy.”
“Deferring problems to future budgets with a nod and a ‘she’ll be right’ wink is unacceptable,” Mr Malleysaid.
While the overall budget misses the mark, Mr Malley says a number of positive initiatives are worthhighlighting:
Small business announcements the shininglight
“The tax cut to small businesses and the tax discount for unincorporated businesses will help drive growth inthe sector and allow these businesses to create jobs and invest in Australia’sfuture.”
“We should be doing everything we can to encourage today’s small businesses to grow into tomorrow’sbig businesses, with all the new jobs and spending which thatbrings.”
“By allowing small businesses to immediately deduct assets costing less than $20,000 is a positive move which will support vital and much needed businessinvestment.”
“Asset write-off relief will have an important cash flow benefit for small businesses, helping them to makevital capital investments and grow theirbusinesses.”
Tax cuts – we need to gofurther
“Despite a welcome cut in the corporate tax rate for small businesses, much more needs to be done to boost Australia’s taxcompetitiveness.
“Despite a cut to 28.5 percent Australia still remains out of sync with the rest of the developed worldwhere corporate tax rates have fallen significantly over recentyears.”
“You only need to look at the UK where the corporate tax rate has fallen steadily from 28 per cent down 20 per cent in recent years. The obvious question is if the UK can do it, then why notAustralia?”
“Australia needs an across-the-board company tax rate cut to increase productivity and to increasejobs.”
“By closing the digital tax loophole come 1 July 2017, the government will finally address a well overdue levellingof the playing field for Australian businesses so they no longer feel like they're being treated as second class businesscitizens.”
“More important than the modest revenue gain being flagged by the Treasurer, this is about enablingAustralian companies to compete internationally, grow their business and employ moreAustralians.”
Supporting innovation is vital for Australia’sfuture
“We’ve been saying for a long time that innovation is the key to Australia’s future. It’s only through our brainsand entrepreneurial spirit that we will create the industries and jobs of thefuture.”
“It is disappointing that we allow too many Australian researchers to end up with American accents when they have no choice but to go overseas to realise the potential of theirinnovation.”
“It is encouraging that the budget highlights initiatives to level the playing field for small business, by removing the current obstacles to crowd-sourced equity funding and expanding the tax concessions for employee share schemes.”
“These types of initiatives help bring us in line with global best practice and allow Australia to compete on a global stage.”
“These initiatives will help Australian businesses turn their ideas into viablebusinesses.”
“We note that such a regime must strike an appropriate balance between the financing needs of businessand sensible investorprotections.”
Incentives to employ olderAustralians
“With the release of the latest Intergenerational Report we need to stop thinking about the ageing population asa problem.”
“The fact that we are living longer is something to becelebrated.”
“Beyond the obvious productivity benefits, there are a host of social and economic gains to be derived from providing opportunities for older workers, with their experience, common sense and wisdom, to remain engagedin the workforce for longer”, Mr Malleysaid.
“For businesses, especially as they grow, cash flow is vital – this initiative is welcome and shows that the government is speeding up the process for business to get these importantfunds.”
Why the ATO is looking closely at you this FBT time
Date: 2014-05-29
Almost half of all tax collected flows through about 800,000 employers. In an environment where tax revenues are falling, Fringe Benefits Tax (FBT) is of particular interest to regulators. The simple reason is that the ATO can rely on the fact that many employers simply fail to recognise their FBT obligations - it is low hanging fruit.
To save you from the virtual equivalent of a knock on the door from the ATO, we’ve devised our list of the key things to watch out for pre and post the end of the FBT year on 31 March:
iPad vs Laptop...what’s the difference?
The answer is not a lot any more. A few years ago the ATO considered that an iPad and a laptop were two different items with different functions. But now the ATO is being forced to keep pace with evolving technology and has revisited the issue.
So why is this important? The distinction is important because under FBT law, an employee can for example, salary sacrifice one portable electronic device each year FBT free as long as that device is also used in their job. So, that means that as long as you use the device for your work (for example working from home), you can pay a lot less for that device than if you just walked into the shop and bought it. But wait there’s more. You can also salary sacrifice more than one electronic device each year as long as those devices have different functions. So, you could salary sacrifice a laptop and an iPad in the same year FBT free if the laptop and iPad had different functions.
With technology melding the functionality of electronic devices, the ATO have now said that employers need to look at the function of the device to make sure there is only one FBT free device with that function each year. If the function is effectively the same, then only one device can be FBT free. Something to watch out for.
Cars & FBT: what you should be on the look out for
Every year the ATO tells us what sort of things they’re looking out for and they are always interested in cars! The ATO’s view is that there are probably plenty of situations where FBT should be paid but isn’t.
One of the ways the ATO figures out if there is an FBT liability is by looking at companies claiming car expenses but are not lodging FBT returns and not reporting employee contributions on the company tax return. This doesn’t mean there is a problem but in some cases the ATO might ask you to prove that the car expenses don’t trigger FBT.
Car fringe benefits: Rudd Government changes now six feet under
Before the election, the Rudd Government sent the car and finance industry into a spin by announcing that they would scrap the Statutory Formula Method used to calculate fringe benefits tax on cars. The Abbott Government has now formally stated that they will not proceed with this measure.
If the statutory formula method had been scrapped, there would be an adverse effect on the taxable value of car fringe benefits where the car was mostly used for private use or the employee failed to keep an eligible log book. When using the statutory formula method, the taxable value of car fringe benefits is a flat 20% of the base value of the car, regardless of the distance travelled by the employee (note there are transitional rates in certain circumstances).
Travelling or living away from home. What’s the difference when it comes to tax?
Over a year ago, significant changes were made to ‘living away from home’ allowances to tighten up the rules. But the ATO has a view that not everyone is playing by the new rules.
Part of the problem comes down to defining whether someone is actually living away from home, or just travelling. The ATO is looking closely at Australian taxpayers claiming LAFHAs to make sure they are not incorrectly claiming exempt LAFHA.
If somebody is living in Sydney but travelling to Melbourne every other week for work, they are simply travelling. They may be entitled to travel deductions but cannot claim an exempt LAFHA. If the person relocates temporarily to Melbourne, keeps their home in Sydney for their use (can’t be rented out), then it’s more likely they can claim a living away from home allowance. You need to double check to get the distinctions right.
Is it possible to salary sacrifice your spouse’s car?
It’s not all bad news on the FBT front - there are still some opportunities out there. One area we are often asked about is associate leases. An associate lease is where you salary sacrifice the car repayments for an associate’s car, for example your wife’s car. In effect, your spouse leases their car back to your employer for you to use. This arrangement does not have to be just for new cars, it can work well with existing cars. And, it works best when your spouse is on a lower tax bracket than you or is not earning an income.
While these arrangements sound good because they ultimately reduce the tax paid by the higher earning spouse, they may fall foul of the ATO’s anti-avoidance rules. It’s important to make sure that the appropriate documentation is in place to support these arrangements and the non-tax reasons for having an associate lease are clear.
School teachers & retail employees beware: In-house benefit rule changes
If your employer lets you salary package the goods and services that they sell, then this is an in-house fringe benefit. Common examples include retailers who provide discounted clothes to employees or private schools discounting school fees for the employee’s children.
Back in the 2012/2013 ‘mini Budget’ (the Mid Year Economic and Fiscal Outlook) the Government announced that they would scrap the concessional treatment that applied to in-house fringe benefits. The old treatment allowed employees to only recognise 75% of the lowest publicly available cost of the goods or services reduced by a further $1,000 in their salary sacrifice agreements.
The transition period for this change that allowed people with pre 22 October 2012 salary sacrifice agreements to keep receiving the concession, ends on 31 March 2014. If you are an employer with these agreements in place and you have not reviewed them, you need to do this quickly as it might significantly change the remuneration of your employee. If you are an employee receiving the concessional FBT treatment, you need to understand what the change will mean to you.
Selling shares or property? Why the ATO is looking over your shoulder
Data matching helps the ATO identify taxpayers that have not declared the full amount of income they make on their tax return.
They are now looking to expand the sources of data they match to make sure they get every last cent owing from the 12.4 million individual income tax returns lodged.
Treasury released a discussion paper on tax compliance and ATO data matching; putting forward ideas on some ways they wanted to increase the powers of the ATO to data match to cover areas such as sales of property, shares and units, and sales through merchant services. And you can understand why given that in 2012 alone, the ATO identified 1.4 million anomalies in property sales data compared to what was declared on income tax returns for Capital Gains Tax purposes.
The discussion paper is a ‘warning’ of what is coming. It’s likely that in years to come, the ATO won’t need you to tell them what you’ve been doing, they will already know.
AusIndustry R&D deadline looms
The deadline to register with AusIndustry for the R&D Tax Incentive ends on 30 April.
The tax incentive is there to help businesses offset some of the costs of doing R&D. The program is open to businesses of all sizes in all sectors that undertake eligible R&D. If your business’ activities are eligible, the offset can be a huge benefit offering:
- a 45% refundable tax offset (equivalent to a 150% deduction) to eligible entities with an aggregated turnover of less than $20m pa; or
- a non-refundable 40% tax offset (equivalent to 133% deduction) to all other eligible entities.
Crystal ball gazing - what 2014 will mean to you
Date: 2014-05-29
What a strange few years we’ve had. A two-speed economy meant that the day-to-day experiences of many people were not matched by Australia’s outstanding headlines. But right now, consumer sentiment appears to have picked up with retailers expecting over $15.1bn to have gone through the tills pre Christmas, the housing market is hotter than ever, and flowing from that, household wealth was at record highs rising by 6% across 2013. So, as Paris Hilton would say, we’re totally hot right now.
On the downside, the divide between rich and poor is greater than ever. Not everyone is riding the wave and those not on it are drowning not waving as the cost of living increases. More than 8,000 people lost their jobs in December 2013 and more have dropped out of the system as older workers and the disenfranchised stop trying to find work (according to Westpac, the actual unemployment rate would have been 6.8% not 5.8% if the participation rate had not fallen over the last 6 months). The Government has also stated that it will not be popular this year with Deputy Prime Minister Warren Truss saying “you cannot reduce expenditure without having an impact on people.”
For employers, almost all economic and business surveys are showing that confidence is up but this has not translated into jobs growth.
So, what can we expect in 2014?
What’s changing?
The Treasurer Joe Hockey has flagged that a structural overhaul of the economy is required to prevent a “decade of deficits.” The Mid Year Economic and Fiscal Outlook released in December stated that the Budget wouldn’t get back into surplus “even if there are no tax cuts for the next 10 years.” At the very least, you should expect the May Budget to be more like a renovation than a refresh with all options on the table. Welfare is a likely target, so are any concessions or benefits out of alignment with the overall tax system.
In addition to the big picture tax changes flagged during the election to repeal the mining tax and carbon tax (both Bills are currently before the Senate), you can expect a focus on: how money moves between individuals, companies and trusts and the tax paid; non-residents; and, a renewed attempt by the ATO to try and recover the almost $18b of tax that is currently owed.
Your business
While there will be a heavy focus on revenue raising over the next few years, there will also be structural change. The Abbott Government has pilfered the American concept of a ‘repeal day,’ and plans to axe more than 8,000 redundant Federal laws to reduce red tape.
The repeal day is scheduled for the House of Representatives on 26 March, following the introduction of an omnibus red tape reduction bill and a series of specific deregulation bills on 19 March.
The repeal day follows the scrapping of 71 unlegislated and unresolved tax and super announcements late last year. Among the items scrapped were the Gillard/Rudd Government’s announcements to cap self-education expenses at $2,000, remove the statutory method for car fringe benefits, and change tax on earnings on super assets。
For small business, many of the concessions encouraging you to purchase motor vehicles or invest in business assets have either already gone, or are likely to go. If the mining tax is abolished, a number of small business tax concessions will also go. For example, the immediate deduction for depreciating assets costing less than $6,500 will be reduced back to the old rate of $1,000. The start date for this is intended to be 1 January 2014.
Looking after No. 1 – protecting you
If you plan on quitting smoking then you are part of a nationwide trend. According to the Australian Bureau of Statistics (ABS), the smoking rate decreased from 22% in 2001 to 16% in 2011/2012.
Weight loss is another New Year’s resolution for many. However, despite the fact that we are all conscious of our weight, the ABS tells us that the proportion of adults who are overweight or obese in Australia rose to 63% in 2011/2012.
Your weight and whether or not you smoke not only have a major impact on your health, life expectancy, and wallet, but these two factors often determine what you pay for insurance.
The strange thing about life is that we live as if life is consistent. The reality is that it isn’t - accidents, illnesses, social issues always seem to come as a surprise despite the fact that we know problems commonly occur - just not to us. So, to protect yourself in 2014, here are our top 5 things you should do:
Get your insurance sorted - at the very least, you should have life insurance. Insurance for total and permanent disability and income protection is even better. If you have a SMSF, your investment strategy needs to consider life insurance for fund members. If you own or invest in a business, it’s important to consider what might happen if you, or one of your fellow directors dies or is permanently or temporarily incapacitated. There are some clever structures that can be put in place to manage all these eventualities.
Make a will or make sure it is updated - as life changes so should your will. When was the last time you reviewed it? Enduring Power of Attorney is also a major issue right now, particularly for those with SMSFs.
Plan ahead - while it seems that most personal financial planning strategies are all about retirement, this isn’t really the case (it’s just where the money is). There is a wide array of strategies that you can employ when you’re coming into and in your best income producing years to help build and maintain wealth.
Protect your personal health - your diet and exercise patterns make a difference. Exercise reduces your risk of heart attack, diabetes and unexpected disease. If that’s not enough, The Guardian also reports that there are some indications that exercise makes you smarter!
Invest in good advice - major personal, financial life or business decisions deserve attention. OK, yes we know coming from us this might sound self-serving but good advice can make the difference between a good and not so good result. You need to know what to look for when it comes to structuring, tax, planning, and strategy.
Easy come, easy go: The PPSR & your business
31 January 2014 should be seared into the brains of business owners and operators.
When thePersonal Property Securities Act (PPSA) came into effect in January 2012, it provided a two year grace period to register security interests on the Personal Property Securities Register (PPSR). The PPSR is a national register of who has security over different forms of property (other than land and buildings). If you sell goods under retention of title or consignment arrangements, if your business hires or leases goods or equipment to others, if you buy or sell used goods, you need to register your security interests by midnight on 31 January 2014 or risk losing that property.
Imagine this...you are in business and have supplied stock to a retailer. You haven’t been paid for the stock but continue to supply to the retailer under normal terms of trade. When the next delivery arrives at the retailer it can’t be delivered because the store is closed and chained up. Your business hasn’t been paid yet. You sold the goods on a retention of title basis so the stock belongs to you until the retailer pays you, right? The answer is not necessarily. If your security interest in the stock is not on the PPSR, then your rights may not be recognised even if you can prove you have legal title. One business has already learnt this lesson the hard way when they lost the rights to assets they held legal title over because they did not register their security interest on the PPSR but a financier did (see Maiden Civil v QES [2013] NSWSC 852[1]).
The PPSA is one of the most important changes to business in many years. It means that ownership is no longer king if you get into a slouch about who owns what. It’s important to review whether or not your business is affected, and if so, register quickly.
If you are buying assets or entering into agreements, it’s also important to check the register to find out who has a security interest over the property involved.
The PPSR is not just for business. If you are personally buying anything valuable that is second hand, for example a car, you should check the register.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
Budget 2015: The rumours, predictions and reality
Date: 2014-05-15
On May 13 when Treasurer Joe Hockey delivers the 2014/2015 Federal Budget, he will be either one of the most respected men in the country for instigating much needed structural reform or one of the most unpopular, if predictions of a slash and burn approach to social welfare come true. Or perhaps a bit of both depending on your view and circumstances.
The Treasurer has been laying the foundation for reform for some time. Australia’s economic growth - once a point of pride during the GFC - is now looking a little flaccid at 2.8% in 2013. We’ve come through the GFC but we’ve failed to do much more than just survive since. Even the growth rate of our kiwi cousins in New Zealand is outstripping us at over 3% on the back of a strong dairy export market.
So the Government’s challenge is to ensure that they do not hinder productivity and do as much as possible to encourage growth. Any reforms will be measured against this philosophy. With growth you get jobs, investment, and of course higher tax revenues.
One of the first moves by the Government when it came to power was to appoint the National Commission of Audit headed by Business Council of Australia President and former Transfield Chairman Tony Shepherd. The Commission’s function is to look at how to improve the efficiency and productivity of Government expenditure. In other words, help identify how the Government can get a better ‘bang for its buck’. The Commission’s report will lay the foundation for the impending Budget reforms.
In mid February, the Commission of Audit completed the first phase of its review and presented it to the Government. While the report and the Government’s response to it have not been made public, key recommendations of the report have already been leaked to the media.
This month, we attempt to prepare you for what’s to come and look at the Budget rumours and their impact. It’s not uncommon for Government to leak its own bad news before delivering the Budget to prepare the population for what’s to come and in some circumstances to ‘test check’ how a particular measure is likely to be received before it’s confirmed.
Rumour - The end of ‘middle class welfare’
Mr Shepherd was recently quoted as saying that “People who can look after themselves should look after themselves. They shouldn’t rely on government … If people are getting welfare who are well and truly able to look after themselves, that’s not fair. When our report comes out you’ll see it all.’’
The question is, how will the reforms be structured? The rumour is that the income test for Family Tax Benefit B will be reduced. Previous proposals have recommended combining family payments including Family Tax Benefit A and B, into one.
Our view is that access will be tightened to family payments. There is also a high likelihood of a restructure to how family payments are applied.
Rumour - Sale of Government assets
Treasurer Joe Hockey has said that the Government needs to look at: “How we can recycle assets; sell existing government assets, giving mums and dads of Australia an opportunity to buy those assets out of their superannuation monies or through other means, and recycle precious taxpayer money into new productive assets that are going to facilitate growth in the non-mining sector”.
The sale of MediBank Private has been discussed for some time. The ABC and SBS are also possibilities.
Rumour - Means testing Medicare
A Health Department plan leaked to the Australian Financial Review recommends changes to how GPs are compensated by Medicare. Under the scheme bulk billing would be limited to concession card holders and children. The tiered system would provide doctors with a full concession for children, less for adults receiving Family Tax Benefit A, and even less for everyone else – creating a gap in the bulk billing system for people in tiers 2 and 3.
The Government has not ruled out the tiered system but repeats the line that Health Minister Peter Dutton has been using “….our 1980s Medicare model health system is tracking on an unsustainable path”.
Rumour - Prime Minister Tony Abbott’s maternity leave scheme scrapped
The Commission of Audit is reportedly not happy with the cost of the Prime Minister’s paid parental leave scheme. Due to commence on 1 July 2015 and costing $5.5bn per annum, the scheme would see recipients receive their full salary for up to 6 months capped at $75,000 plus super – so women earning up to $150,000 per annum would receive their full salary for 6 months. The scheme is to be funded by a 1.5% levy on large business.
The Greens support the scheme but not the cap – their scheme has a $50,000 cap.
Whether in the Budget or during it’s negotiated passage through the Senate, the Government’s paid parental leave scheme will be watered down. It sits uncomfortably with the terms of reference of the Commission of Audit and does not have the broader support of the other political parties to make the passage through Parliament untouched.
As one commentator pointed out though, all of the debate is focussed on ‘rich women on high incomes’ being paid to stay at home. Statistically, women in the Australian workforce are neither rich nor high income earners with around 2% of all women earning over $100,000 compared to just below 8% of males.
Rumour - Increasing the GST to 12%
Former Treasury boss Ken Henry has been talking up the idea of increasing the GST stating that it is inevitable.
Our prediction is that while it is inevitable, it won’t be in this budget. The Government will seek to manage the budget in other ways. It’s more likely that the debate on the rate of GST will be had as part of the impending White Paper on Tax Reform promised within the first 2 years of the Abbott Government.
Rumour - Increasing tax on super
Australians currently have over $1.3 trillion invested in superannuation. Assuming you stick to the rules, the tax paid on superannuation is relatively light compared to the tax on other forms of investments. While it would be tempting for any Government looking to raise revenue to take a larger percentage of superannuation, our view is that it’s unlikely for now. The Government has already stated that it will stop tinkering with the superannuation system to give people certainty and the confidence to keep investing in it.
If there was a change, the most likely area is to uniformly tax gains inside a superannuation fund. At present, no CGT is payable on gains made by a fund when it is in pension phase.
Rumour - No age pension until 70
Treasurer Joe Hockey is quoted as saying that the eligibility age for the pension was “…set at that level in Australia in 1908 when life expectancy was 55”. The previous Government increased the pension age by six months every 2 years from July 2017 until it hits 67 in 2023. The Productivity Commission called for pension age to rise to 70 – a view supported by the Treasurer.
Our view is that pension age will not move beyond the previously announced reforms at this stage. If there was a change, the Government might speed up the timeframes for the increase to the pension age.
What’s missing?
Interestingly, very little has been leaked or rumoured that’s directly relevant to business. The Government has already stripped out much of the excess concessions available to business when they decided to repeal the mining tax and the associated spending measures such as the loss carry back rules and generous deductions. One of the simple reasons is that business reforms or business related spending cuts are not vote winners or losers compared to say family tax benefits or superannuation that directly affect voters. Reforms to Government spending on business barely scratch the surface unless they are job killers.
The last remaining vestige is the small business CGT concessions that allow, in some circumstances, small business to reduce the capital gains tax they pay on the sale of assets to nothing. The Henry Review back in 2009 recommended changes to these concessions to remove the active asset 50% reduction and 15-year exemption. Our prediction is that these concessions won’t be removed just yet but will remain sitting as a target and potentially will come up again in the Government’s upcoming white paper on tax reform.
For business, it is more likely that we will not see the structural reforms needed to grow productivity, jobs and investment – such as reducing the company tax rate to 28.5% from 1 July 2015 as promised by the Government during the election and the changes to the GST take that would see State Governments remove payroll tax.
Outside of business a potential area of change is the general 50% CGT discount. The discount currently applies to assets that have been held for more than 12 months. The discount has already been removed for foreign and temporary residents from 9 May 2012. The question is whether it will be scaled back or scrapped for residents.
Senate leaves small business in limbo
When the mining tax (Minerals Resource Rent Tax) was introduced, a bundle of small business concessions were funded by it including the loss carry back rules and generous depreciation concessions. In March, the Senate rejected the Bill repealing the mining tax and the associated concessions leaving small business in limbo.
For example, the repeal Bill stipulates that from 1 January 2014, the threshold for an immediate deduction for assets purchased by small business entities would reduce from $6,500 to $1,000. With the Bill stuck in the Senate until at least July this year, it’s difficult to know whether the 1 January date will be changed.
The best anyone can do at present take a conservative view that the concessions will be repealed in line with the current Bill.
Some Businesses Go Creative on Prices, Applying Technology
Date: 2014-01-30
Many business owners struggle with pricing. Should their first concern be covering costs or figuring out what the market will bear? How do they determine what the market will pay without raising prices high enough that some customers flee? And can they offer discounts without damaging their price brand?
There may be no easy or universal answers to these questions, but new thinking and new technology has made it possible for some, like the airline and hotel industries, to use what is known as dynamic pricing to vary prices according to demand and fill seats and rooms more efficiently. Now, more small businesses are finding ways to adapt their strategies.
You can find consultants that charge for results rather than by the hour, restaurants that charge what is essentially a ticket price that varies according to how busy the restaurant is, and even some businesses that ask customers to pay what they wish.
And Uber, a Silicon Valley company founded four years ago, has a mobile app that connects a small army of black cars with people who need rides in 70 cities worldwide and employs “surge pricing.” Uber, which takes 20 percent of all fares, charges more when demand is high and the supply of cars low.
“You get far more cars on the road and they stay out longer when surge pricing is in effect,” said Travis Kalanick, a co-founder.
You also get some cranky customers. In the last few months, the company has received an onslaught of complaints when the cost of a ride rose to as much as seven times the normal rate during a snowstorm and on New Year’s Eve.
“One of the things we’ve learned,” Mr. Kalanick said, “is that the more crisply you deliver the message to the customer and the more you set expectations ahead of time, the more you get to a place where there’s no issue with it.”
Uber’s prices are controlled by an algorithm — technology that is increasingly available to even the smallest enterprises. Craig Clark, for example, sells more than 2,600 items — vintage china, bras, house numbers — on a variety of online marketplaces. Two years ago, he was collecting $2,000 a month in revenue from his sale of house numbers on Amazon.com.
“Six months into it, my sales went down all of the sudden,” he said. “Amazon went out and got a wholesale account and started selling the numbers themselves. So you’re not just competing against other sellers, you’re also competing against Amazon.”
Mr. Clark had been laid off from his job as an analyst for a telecom company outside Philadelphia, so his online retail ventures had become his only source of income. Like many Amazon sellers, he started re-pricing items manually, but found the process wildly time-consuming. And mistakenly pricing a Jenga game at $13.99, instead of $23.99, once cost him $1,200.
Then, he learned of FeedVisor, which makes re-pricing software. “You tell them what the item cost you, the commission you pay to Amazon, and your highest and lowest price,” said Mr. Clark, whose annual revenue is approximately $500,000. “FeedVisor then algorithmically decides the best price within your parameters and what everyone else is selling at.”
The company, one of many that sells re-pricing software, charges 1 percent of sales and provides a dashboard that lets sellers analyze sales and profits. Using FeedVisor last summer, Mr. Clark said his “sales on Coobie bras went up 25 percent almost overnight.”
FeedVisor reduced the price on the bras, which he was selling for between $19 and $23, by $2 or more to make them more competitive. That reduced his profit margin, Mr. Clark said, to 37 percent from 39 percent — but increased his volume. The software also produced sales increases on other items of from 15 to 40 percent, he said, and helped him unload stale inventory, such as a pallet of pots and pans. “I hadn’t sold one in six months,” said Mr. Clark, “and I got rid of them in four days.”
Restaurants, too, are using innovative pricing strategies. In September 2012, Groupon acquired a restaurant reservation engine, Savored, and has since integrated it into a new high-end division called Groupon Reserve. Instead of offering customers, say, $50 off a meal as traditional daily deals do, Savored lets restaurants offer customers a percentage off an entire meal in return for dining at a specified time.
Cacio e Vino, a Sicilian restaurant based in Manhattan, has been using the app for two years, said Christine Ehlert, the manager. “On Sunday, Monday and Tuesday, we offer a certain number of tables for a 40 percent discount,” she said. Wednesday and Thursday diners may get 30 percent off through the app and customers who make reservations for between 5 and 7 p.m. on Friday and Saturday get a 25 percent discount.
Ms. Ehlert said that she initially worried whether the discounting might damage her brand. “But since we only offer a limited amount of discounted tables at certain times,” she said, “I feel that we can explain to people that it’s a way to drive new business to us in off hours.”
Cacio e Vino pays Groupon a flat fee of $2.50 per diner. “The nice thing is that if it seems we’re going to be too busy,” Ms. Ehlert said, “I can call our rep at Savored and close out the deal.”
Before using Savored, she said, the restaurant typically had $800 in sales on Mondays and Tuesdays. “Now, it’s between $1,200 and $1,500,” she said, with a profit margin on the discounted customers that is about half that of the full-price customers. She said slightly fewer than half of the restaurant’s discounted customers come back, typically for another discounted meal.
Frank and Rhonda Duffy run Duffy Realty of Atlanta, one of a growing number of real estate agencies trying new pricing strategies. The Duffys charge an upfront listing fee of $500 and one third of 1 percent when a house sells. According to Zillow, the agency has about 800 active listings and had more than 1,400 sales in the last 12 months. Mr. Duffy said the agency’s 2013 revenue was $5.3 million.
For the reduced fee, the Duffys offer limited service. The firm adds homes to the local Multiple Listing Service, as well as on Zillow and Trulia, supplies sellers with a 60-point, do-it-yourself marketing guide, rents lockboxes for $100, and charges $94 for a home to be professionally photographed. One of the firm’s four listing specialists is likely to come to take your information. Then, a team of specialists, including client services representatives, buyer’s agents and contract negotiators, moves buyers and sellers through the sale process.
To provide an incentive to agents from other firms to bring buyers, the Duffys encourage sellers to offer the buyer’s agents commissions of 3 percent or even 4 percent. Most sellers do it, he said, because they still come out ahead. On the sale of a $300,000 home, for example, a traditional agent might split a 6 percent commission, or $18,000, with a buyer’s agent. A seller listing with Duffy will pay a $1,520 commission ($500 plus one third of 1 percent, or $1,020), plus 3 percent ($9,000) or 4 percent ($12,000) for a buyer’s agent, or a total of between $10,520 and $13,520.
The pricing model does not suit all sellers. “The danger is you’re not getting the advice and guidance,” said Frank S. Alexander, a real estate professor at Emory Law School. “What do you with inspection results, or during the due diligence period, or in a contract negotiation?”
For experienced sellers, or in a particularly hot market, that may not matter.
(Source from: Donna Fenn, The New York Times)
