November 2011 Newsletter

You can view this newsletter in its original format here.

What follows is the text of the newsletter only. 

Market outlook for 2012 

2011 has been an eventful year to say the least. Tsunamis, Earthquakes, political infighting and looming potential sovereign defaults have led to very volatile markets both here and abroad. We think investors have to adapt to this new environment. We don’t believe the experience of property, shares or fixed income during the past 30 years will be a guide to the next decade. The key difference, of course, is the excessive build-up of sovereign debt globally that has accumulated over the last 30 years. This will have a significant impact on global growth and interest rates around the world. We believe developed economies now face an extended period of deleveraging (i.e. paying down debt). This has a number of important ramifications for investors. Asset allocation strategy and sector weighting tactical tilts within an equity portfolio have never been so important.

If everything goes to plan for Australia in 2012, the key feature of the domestic economy is likely to remain the uneven expansion. The resource expansion is set to continue. Through 2003-08 the key to the boom was the rise and rise of commodity prices. The key to the second leg of the boom is the likely rise and rise of mining-related investment spending. The investment pipeline continues to bulge. The graph below shows the value of work to be done on projects already commenced.

Behind this already-impressive workload is a wall of additional yet-to-commence projects. This has several implications.

1. It suggests that Australia’s growth outlook is less dependent on China than many seem to believe as these projects are being developed on the back of a 20 to 30 year commodity outlook.
2. The robustness of the investment outlook is a pillar of the RBA’s policy outlook. With mining and mining-related sectors providing an out-sized contribution to growth, the RBA will continue to aim to cap growth in the rest of the economy at a sub-trend pace. (i.e. Two-Speed economy)
3. If global growth does slow – as seems likely – then any effect on commodity prices would mainly affect corporate profits and public sector finances. It would also work to weaken the AUD, providing a partially offsetting stimulus.

So in short, Australia is well placed to weather a looming potential developed market storm in the coming year. We believe there is a place for specific equity strategies within client portfolios but margin of error will be narrower than in a normal ‘bull’ market where even weaker stocks can be pulled along. From an Asset Allocation point of view, there is no question that matching your risk profile to your strategy has never been so crucial, especially for self-funded retirees.

Proudly supporting Eyes for Africa

This year we have been privileged to establish a support partnership with Eyes for Africa.

Eyes for Africa is a not-for-profit foundation that is committed to treating preventable blindness amongst some of the poorest of the poor in rural Africa, particularly Ethiopia. Since 2007 full-time Ophthalmic nurse Julie Tyers, who heads Eyes for Africa, has made a number of trips to Ethiopia, using her own Annual Leave, to help those without access to the kind of basic eye-care that we would normally take for granted. Julie has said "We go where where no-one else wants to go". You might see us drawing a little more attention to Eyes for Africa over the coming months and years as we seek to promote this invaluable work.

In lieu of Christmas cards this year we will be making a donation to Eyes for Africa.

If you'd like to support Eyes for Africa too, or to find out more information about what they do, please visit the Eyes for Africa website. You can also read this excellent article from a recent issue of Mivision, an eye-care industry publication.

Christmas closure

With Christmas just around the corner, we thought it a good time to give you some advanced notice of our opening hours over the Christmas/New Year period.

As is our custom, we'll be closing the office between Christmas and New Year's Day. So that we can have some time to celebrate with our team, the office will be closed from 1:00pm on Friday, 23rd December. We will re-open again on Tuesday, 3rd January.

During this time you can still call the office and leave a voicemail, and we'll arrange for someone to return your call as soon as possible. Or feel free to send us an email or fax, which we'll be checking regularly. In addition, you can leave any documents for us in the locked drop box on the western wall next to reception.

October  2011 Newsletter

You can view this newsletter in its original format here.

What follows is the test of the newsletter only.

The dos and don'ts of Christmas parties and gifts

Christmas is a time of giving, and the workplace is often no exception. Many employers use the holiday season as a time to reward staff and recognise their achievements, or to simply express gratitude through a gift of some kind. There is a potential problem though - gifts provided to employees and their family members can attract Fringe Benefits Tax (FBT). So how can you make sure that your employees receive the full value of your Christmas gesture without the cost of additional tax (to you or them)?

Christmas parties
If you're planning to hold a Christmas party for your staff, the easiest way to make sure that your FBT is minimised is to keep the value per head to under $300. If you do that, generally no FBT is payable for either the staff or their associates (partners, other family members, etc.). If it's likely to come in at over $300 per head, things get a little more complicated and we'd advise you to speak to us because the FBT implications will vary depending on a number of factors, including where the party is held and who attends (i.e. just staff, or partners and associates as well). For most small-medium businesses however, a cost of greater than $300 per head is unlikely unless you're putting on a red carpet event!

While you might be able to take advantage of an FBT exemption for Christmas parties under $300 per person, it's worth remembering that in most cases the cost is not tax deductible because it is considered to be entertainment, which is specifically a non-deductible expense. You also cannot claim a GST credit for entertainment expenses.

Christmas gifts
The same $300 limit applies for Christmas gifts that you give your staff. These are considered to be 'minor' benefits. So if you give some chocolates, a bottle of wine or even a voucher as a Christmas gift, provided that the total value of the gifts is under $300, no FBT is payable and the gift can also be tax deductible in many cases. Even where the gift is provided at a work Christmas party, it will be treated as a separate item from the party itself, so it's actually possible to provide two benefits - the party and the gift - and have both be exempt from FBT. In addition, the limit applies per person, including gifts to 'associates' (i.e. mostly family members), so you can give gifts to an employee and the members of his or her family, and provided the value to each person is less than $300, no FBT is payable.

There are, however, some gifts that are specifically considered to be entertainment, so if possible, you should avoid providing these. They include movie tickets and concert tickets, and other items that provide entertainment as the benefit (though the line between what is and is not entertainment at times seems a little arbitrary). These items would still not be subject to FBT, because they remain minor benefits if under $300, but because they are entertainment in nature they are not tax deductible (which increases the overall cost to you). You also cannot claim a GST credit for entertainment expenses.

It's also worth pointing out here that cash bonuses provided to employees are taxable in the hands of the employee. Cash is not a fringe benefit, so there is no FBT payable, but it is considered to be a part of the employee's remuneration. For this reason, where possible, it's more tax effective to give an actual gift of some kind (provided it is under $300 in value) rather than the equivalent amount in cash. Also as an employer, you are obligated to withhold the appropriate amount of tax from a cash bonus, as you would for the ordinary salaries and wages of employees.

You should also note that if you are a tax-exempt organisation or you use what is known as the '50-50' rule or the '12-week register' method for meal entertainment (you'll probably know what these terms mean if they apply to you), these exemptions are not available to you.

So to summarise...
• If you hold a Christmas party and keep the cost to under $300 per head there is no FBT payable, but the costs are not tax deductible and no GST credit can be claimed;
• If the cost of the party goes over $300 per head, the FBT implications will vary depending on the circumstances (an exemption from FBT may still be available for employees);
• If you want to give your employees a gift, keep the value to under $300 per person to ensure that no FBT is payable;
• You can provide gifts to an employee and his or her family members and as long as the total gifts to each person is under $300, no FBT is payable;
• Don't provide gifts that are for entertainment events, like concert and movie tickets;
• If you provide a cash bonus, the amount will be taxable to the employee, so to maximise the benefit try to think of a suitable gift instead of providing cash (even a voucher will do).

Naturally, this might seem like a fairly dry and impassive approach to a season where people often throw caution to the wind. You might want to provide a particular kind of gift or event and not worry about the cost or tax consequences. We don't want to sound too much like accountants - though perhaps that's impossible! - so it's important to acknowledge that at the end of the day, it's the gesture that matters. But if you have a particular budget in mind, these guidelines will ensure that you do it as cost effectively as possible. It might be that you are adding additional expense to your gesture when, with a few minor adjustments, it's unnecessary to do so.

Fringe Benefits Tax is a complex area of the law and every situation is different. If you have any questions about your specific arrangements or an event or gift you might be planning, we encourage you to contact us first to seek some advice.

How long do I need to keep my records for?

A question we're often asked is "how long do I need to keep my records for?". We're talking about the receipts and other documents that support the transactions that end up getting included in your accounts and income tax returns. We thought we'd outline the rules for you very simply. Naturally, it can be more complex than this so we'd urge you, if you have any concerns, to contact us for more advice.

• Individuals - 5 years from when you lodged your return. If you lodge your return through a tax agent, this usually means you have extended lodgement deadlines, so your return may not be lodged in some cases until close to 12 months after the end of the financial year. So 5 years can in some instances end up being closer to 6 years.
• All other entities - 5 years from the date of the transaction.
• Companies - 5 years for income tax purposes (since a company falls under 'all other entities' above). However the Australian Securities and Investments Commission (ASIC), which regulates company activity in Australia, requires records to be kept for 7 years from the date of the transaction. So practically this means that for companies, records need to be kept for 7 years rather than 5.
• Any document that relates to the purchase of an asset  - 5 years after the date of sale, and therefore indefinitely as long as the asset is still owned by you. There are also special rules that apply when you make a capital loss on an asset.

That last item can often catch people out. You might think you have passed a record keeping deadline, and so you have a clean out of your old documents. But actually you need to sort through it all first, and dig out and retain anything that relates to assets that you still own or have sold within the last 5 years. It's often better to put these records in a 'permanent' file from the very beginning so that you don't have to sort through it all years later. Another option is to record these assets in a Capital Gains Tax Asset Register. This is a record of your assets maintained and signed off by a registered tax agent. In this case, you can then discard your records after 5 years, from the entry being made into the register. For long term assets, this is far less onerous and more space efficient that 'indefinitely'! We can help you maintain a Capital Gains Tax Asset Register so please contact us if you'd like more information.

Complimentary Presentation - Unlocking Wealth Creation Opportunities

It's not too late to register for our special investment session with Morgan Stanley Smith Barney.

There's a lot of market volatility at the moment and for any investor it's a difficult time to find a way through it all with any kind of certainty. So we've partnered with international wealth management specialists Morgan Stanley Smith Barney to host a special presentation called 'Unlocking Wealth Creation Opportunities'. Find out how to uncover value and manage expectations and emotional responses, and learn some of the stock picking strategies of professional investors.

Where: Dewings - 5 Hauteville Terrace, Eastwood SA 5063
Date: Thursday 10th November 2011
Time: 12:15pm (for a 12:30 start)
Cost: Complimentary
Duration: Approximately one hour

A light lunch will be served, and you're welcome to bring a friend or collegue.

Morgan Stanley Smith Barney is the largest private wealth management firm in the world. The firm has over 18,000 financial advisers (over 175 in Australia) in more than 1,000 offices globally servicing over 7 million clients. With world class research capabilities, Morgan Stanley research was recently ranked Number 1 in Australian and New Zealand Equity Research by The Institutional Investor for 2010.

September 2011 Newsletter

You can view this newsletter in its original format here.

What follows is the test of the newsletter only.

Accounting software - time to go online?

For users of QuickBooks and MYOB, there have recently been some interesting developments that could change the way you manage your accounting data forever.

If you're a person that keeps up to date with the latest in computer news and technology, you're probably already familiar with so-called cloud computing. Even if not, perhaps you know a little about it, or at least have heard of the term.

Cloud computing generally refers to any number of alternatives for providing software online rather than installed on desktops. It's about software being provided as a service instead of a product. The idea is that rather than having an application installed on your computer, which you have paid for up front, you instead pay an ongoing service fee to access an online version of the application. Usually, though not always, this will be through your web browser. So, for example, instead of buying the Microsoft Office suite and installing it on your computer, you might instead choose to pay a monthly service fee to access an online spreadsheet application, an online word processor, etc. through your web browser, and possibly even store your documents online. The advantages are many, but there are also some downsides and potential problems. The prominence and adoption of cloud solutions has seen a rapid acceleration recently as internet speed and reliability has improved, as has the sheer volume of online storage that is available.

The accounting software industry has not been left behind in all this. In fact, cloud computing is giving the industry a real shakeup. While there has always been an abundance of accounting software providers in the market place, offering both off-the-shelf and dedicated or industry specific solutions, the small-medium business arena has largely been dominated by MYOB and Quicken (through QuickBooks). Both of these vendors are now offering, and will continue to develop, new cloud based solutions. But because the internet opens up the market significantly, by removing hindrance factors such as manufacturing physical discs and establishing distribution channels, there are a number of new players that have sprung up. And a couple of them are taking up the fight to the incumbents and consequently seeing a rapid take up of their services. These include Xero and Saasu. So if you're a user of computer accounting software, this begs the question - is it time for you to move into the cloud?

Cloud computing is a term that's generating an incredible amount of 'buzz' at the moment. In some sectors you're almost made to feel like a flat earth proponent for having an attitude of wariness and not plunging in head first! The truth however is that relatively speaking, cloud computing is still in its early stages in many respects, and this is certainly the case for some accounting solutions. A number of applications are very 'version 1.0' in terms of their development. So it's worth considering some of the pros and cons before you make the commitment to moving everything online. Some of these will of course be more obvious than others.

Pros
• Accessible - One of the major advantages of cloud computing generally is that your data is accessible from almost any computer that has internet access. This is certainly the case with accounting solutions. Instead of having to license your software for every computer that you want to install it on, you can fire up a browser on any computer and enter data or review results.
• Security - There are some 'cons' in this regard too, so read on for more information. But one significant advantage of doing your accounting online is that all of your data is subjected to a far more rigorous physical backup routine than most users implement for themselves (most likely). This means that the likelihood of you losing data due to a hardware failure or some other disaster (such as fire) is all but eliminated.
• Shared data - Instead of sending backups of your data to your accountant from time to time, and then keeping track of who has what and where things are up to, everyone can access the one data file. Most cloud solutions have an accountant's login which you use to invite your accountant to access your data. This means that there is only one file in existence at any one time. Any changes you make to the file will be seen by the accountant, and likewise, any adjustments your accountant makes for you will be reflected immediately in your data, without the need for adjusting journals and so on. Some also have an area where you can type questions, for those times where you are unsure about a transaction. Your accountant will receive a notification for the query, and can then respond with an answer.
• Eliminate updates - Moving your data online means that you remove yourself from the perpetual upgrade cycle of accounting software (which more often than not is simply a revenue raising tactic on the part of the vendors). You will always be working in the latest version of the software.
• Mobile solutions - Both Xero and Saasu offer mobile apps that allow you to perform certain functions in your software with even greater mobility - from your smartphone.

Cons
• Reduced functionality - At the moment, most online accounting solutions are fairly basic in terms of what they can do. Some are more powerful than others but as a general rule, there is a lot of functionality in the installed versions of QuickBooks and MYOB that will not be available in most cloud alternatives. MYOB's Live Accounts, for example, is offered with very limited features, explicitly for "sole traders, startups and smaller businesses". QuickBooks Hosted uses a 'remote desktop' solution to give you a full working version of QuickBooks online. But this is a little more technical to set up and use, and requires the installation of some local software which potentially limits the computers it can be used on. That is, you can't just walk up to any computer and get started. In this regard the best compromise seems to be from the newer offerings in Xero and Saasu, which have more features than Live Accounts while still being entirely web-based solutions.
• Security - It might seem strange that security is both a 'pro' and a 'con'. Concerns over the security aspect of cloud accounting derive from the fact that the data is outside of your control - it's hosted off site. While some vendors may argue that they put far more time and resources into security than most users on their own PCs (which is true), it's also the case that they are far more likely to be a target for hackers as well. Recent compromises with the PlayStation Network for example, demonstrate that no organisation, no matter how much effort they put into security, is immune from the threat of hacking. There is also the issue of who actually owns the data and what rights you have to protect it once it is offsite. All of this isn't helped by question marks that still remain over who is ultimately responsible for the security of the data (the provider or the end user). Yet another concern for many users is what to do in the event that your provider ceases operations? This can often happen suddenly and without warning. What guarantee is there that you could access your data, or get it back in a format that can be processed by another application?
• Cost - One of the major selling points of cloud computing is that it allows you to pay only for what you need, as you use it. It can quickly become the case, however, that what you 'need' costs a lot more than what it did when paying up front for a locally installed, fully functional version of your software. If you have data files for multiple entities, or require a number of users to have access, the monthly costs multiply accordingly. You'll find that depending on the product, with a couple of entities and users, you'll quickly surpass the up-front costs of a traditional software purchase.
• Accessibility - Again, this is a pro that can also be a con. Having your data online means that you can only access it with an internet connection. If you're a person that likes to get away to input your data, you'll need to make sure you have internet access, and that may involve the additional cost of a wireless solution (assuming you're within range). Also, despite improvements in recent years, we've all been in those situations where the internet is slow or even down. Sometimes individual sites can be slow due to maintenance issues, and if your data is site dependent, this is going to affect you. Even providers as big as Microsoft are not immune to connectivity problems which can limit your ability to access your data when you need it. Regardless, as a general rule data entry is slower online than it is with a locally installed product.

These are just a few of the positives and potential pitfalls of using the cloud for your accounting. While there is a lot to be gained in some circumstances, we would caution not to get caught up in the hype. You're not in the business of accounting - chances are you don't even care for it all that much (gasp!). For most people, accounting is something they do as a necessity. So ultimately whatever works best for you should guide your decision in this area. You need your data entry to be as stress-less as possible. Don't feel pressured by the 'experts'!

We're happy to discuss it with you further and work with you to come up with something that suits your needs. We are not aligned exclusively with any one product, which means we can support any of the major accounting solutions that are out there - either on ground or in the cloud.  
 

Don't forget your free Dewings Lockbox

Just a reminder about our free Lockbox service for all Dewings clients. Lockbox is an online storage solution for your important documents, and also a facility that we can use to trade files with you, such as your accounting data files. Lockbox is not subject to the usual file size limitations of email and we are able to transfer data much quicker, more securely and more conveniently than sending it in the post or by having you drop it off to us.

You can use Lockbox to store copies of any documents you like, and we are happy to scan anything for you free of charge. This is an important fail-safe measure for documents that you may need in a time of emergency, but also handy for items that you simply don't want to misplace. Plus storing your key documents in Lockbox means you can access them from any computer with internet access. This can be helpful if you find you suddenly need something while away, or if say your own computer and backups are destroyed in a disaster of some kind.

When we first set up a Lockbox for you, we also add some past year financial statements and income tax returns for you, and will continue to provide you with electronic copies in this way going forward.

If you're worried about security, we can assure you that security was a big concern for us in finding a solution that would help to achieve our objectives. In the end we chose Lockbox to provide this service because apart from the usual security precautions that are taken by any reputable online solution provider in storing your information, there is another critical step in the process. When you upload a file into Lockbox, or download one to your computer from Lockbox, the file is encrypted before it is even sent. This means that even in the worst case scenario - your data is intercepted in the transfer process somehow - the file will be indecipherable.

There is no catch whatsoever. We provide Lockbox as a value-added benefit of being a Dewings client. If you'd like to find out more, please contact us, or have a look at our Lockbox page at www.dewings.com.au/lockbox.

Dewings proudly supports Car 222  in the Variety Club Bash

For a number of years now Dewings has proudly supported Car 222 - The Precocious Penguins - in the Variety Club's annual Bash. Sue Pearce from Adelaide Expo Hire is the Team Captain and a Dewings client too! We're pleased to pass on the following extract from her report of the 2011 Bash and specifically the fund raising efforts of Car 222.

Unique Sturt Desert Peas welcomed the 2011 South Australian Variety Bashers to their glorious outback garden as rains drenched these normally dry and desolate areas.

Departing King William Road, Bashers trekked to Carrieton, Blinman, Montecollina Bore, Innamincka, the famous Dig Tree site, Strezlecki Crossing, Arkaroola, Copley, Leigh Creek, Parachilna, Wilpena, Bendleby Station, Peterborough, Barossa and toasted their success in Hahndorf, having raised $1.47 million for special needs children.

Car 222, the Precocious Penguins had cause to celebrate after a year of frantic fundraising and were again awarded the coveted Gold Door Panel with an outstanding total of $190,000. Team Captain Sue Pearce from Adelaide Expo Hire together with Roz Chow from House of Chow and May Loo from SARDI are proud to announce their total fundraising in a 6 year history of Bashing is in excess of $894,000 and were proudly awarded the 2011 Dick Smith Trophy as Overall Highest Fundraisers in Australia. Being named as Sponsor of one of the 1,200 Sunshine Buses in Australia this year is one of the catalysts behind the driving force of supporting this outstanding charity and to have our company name together with the 3 penguins is fun for the children -- who all have a personal penguin, and for us – a humbling recognition.

We would like to thank most sincerely our generous sponsors without whom this would not be possible, and only wish you could all see the faces of the special needs children and their parents when the appeal presentations are made. We know they would thank you themselves …… if only they could!

Sponsorship and donations for the 2012 Bash can be made via www.car222.com.au

August 2011 Newsletter

You can view this newsletter in its original format here.

What follows is the text of the newsletter only.

Building a stronger business

Every story is different, and we certainly don't want to paint an unnecessarily gloomy picture. It seems recently though that far from being out of the economic woods of the last few years, we could well be pushing further in. It's all the more important at times like these that you spend time working on your business rather than just in it. Without being irrationally positive - we know sometimes the perfect combination of circumstances can prevail against the most robust of businesses - there are many small things that you can be doing that combine to make your business stronger, improving the likelihood that you can withstand the more difficult times.

Keep close to your clients and/or customers

A testing economic climate is actually a really good time for customer relationship building. It's quite possible that your clients/customers are hurting as well, and reminding them that you are there and that you empathise engenders a sense of loyalty and even camaraderie. There are many small things you can do that will go a long way towards reinforcing your relationship. You could offer a free product or incentive, which might not cost you much but may help them in some way, or at least give them the emotional boost of getting something for nothing. Perhaps you could throw in some slow moving stock as a bonus with other purchases (refer to 'Can you reduce your stock levels' below), or offer a free add-on service? Or get together with another business that is complimentary to your own to offer something of theirs at a reduced rate or for free, and vice versa? You improve your brand in the eyes of your customers by offering them something or assisting them in difficult times, while also helping another business that is in turn helping you. Focus on the little things that make you who you are. Client/customer retention is vital to riding things out and growing your business.

Review your costs

A complete review of your costs is something that's worth prioritising. Although you might be able to renegotiate contracts for your direct inputs, it's not always possible to respond to economic changes quickly in this area - particularly if one of your major inputs is labour. But your overheads (i.e. the indirect costs of doing business) can be a source of more immediate savings. There's no simple way to go about it - you need to work your way through your expenses line by line. The cumulative result, however, can be significant.

Consider your bank fees and interest costs, for example. The thought of changing banks often seems overwhelming, but interest in particular can be a major cost of doing business. Small changes in rates can result in great returns. We know of someone who, as a standard part of their business practice, takes a day off every couple of years and makes appointments with a number of different banks and financial institutions to review what's on offer and whether a better deal is available. While we often feel as though it's the banks that are interviewing us, when you have already established facilities it should be more like you interviewing them for your custom.

There are also more options available now to shop around for your utilities, like electricity and telephone, and even if you have penalties to pay for cancelling a contract early, the savings can outweigh the costs. If you use software, it can be worth reviewing your licensing to see whether you are paying for too many seats (especially where you pay an annual maintenance charge). And while we're on the subject of computers, it's also a good idea to revalue your equipment to see whether you have too much insurance cover. We often hear about the risk of being under-insured, but it can also be the case that you are paying too much for equipment that can be replaced much cheaper today than what you paid for it. You can even reduce your accounting fees by improving your record-keeping and presenting your information in a form that is reconciled and easy for us to follow, with all of the supporting documentation available. Whatever you end up doing in this respect, the key thing is to allocate some time to sit down and start looking.

Talk to your bank

If things are looking as though they might get a little tighter, speak to your bank about your circumstances before there are any problems. You might be able to negotiate reduced payment arrangements for any loans, or a temporary overdraft facility. Even if you don't shop around for a better deal, you can still review your banking situation with your current institution to improve your cashflow. Preparing in advance for the possibility of difficult times reduces stress levels and actually helps to mitigate the impact of external pressures by improving cashflow before it gets too tight.

Can you reduce your stock levels?

It's often cashflow, or a lack of it, that can make things tougher, rather than reduced profitability. If you're a manufacturer or reseller, one of the biggest cash lockups you can carry is your stock. Most businesses keep a pretty close eye on stock levels, but it's worth a review to see whether you can reduce your order levels for a while, only carry what is absolutely needed, or perhaps sell off slow moving stock at a discount or bundled with other sales.

Develop and monitor some KPIs

Key Performance Indicators (KPIs) become all the more important in difficult economic times. It's not always true that you can manage everything that you can measure (although that is a helpful perspective to adopt as a general rule). But it's certainly true that financially speaking, you'll have a lot of trouble managing what hasn't been measured. We provided some specifically 'accounting' type KPIs in our December 2009 Newsletter. You can also Google 'key performance indicators' to find an abundance of alternatives that might be useful for you. The bottom line is, however, that your KPIs can be anything that is meaningful to you and helps you to get a better feel for how your business is doing. For some it's as simple as plotting the weekly bank balance. For others, closely monitoring budget variances (the difference between your actual expenses and what you budgeted - take a look again at our previous articles on budgeting and cashflow budgeting). Often the most important thing for anyone in business is having a dynamic, intimate knowledge not only of what you do, but how you're performing at it. This helps you to respond and adapt more quickly. And this is where KPIs help.

Essential to getting the most value out of your KPIs is having up-to-date information. When we prepare your financial statements each year, this information can be 12 months old or more, making it difficult to do anything with it other than meet your tax obligations. And yet if you use computer software to keep your books, you have a wealth of information at your fingertips. All you need to do is keep up with your inputting.

Review your staff costs

Good people are hard to find. So it's important that you continue to keep your best staff happy, because it costs much more to find and train new people (often many times the annual salary of an existing employee) than it does to spend a little more retaining the ones that you have. Your people can be one of your most valuable assets and you need to treat them that way. Nevertheless, it may also be worth considering whether your staffing levels are appropriate, or at the very least reviewing things like overtime and perhaps putting some temporary limitations in place. If you employ casual staff, you might find some savings by reducing your opening hours, but this is a fairly severe step that can also send a message to your customers and competitors that times are a little tough. If this is likely, a better initial strategy is to check that you have the right staffing for different times of the day, and reduce the number of people you have on deck during the quieter times. If your staff are permanent, discuss with them the possibility of reducing their hours (this would have to be by mutual agreement) or ask them to take some accrued leave while things are quieter.

Make sure you have adequate insurance in place

We're pretty big on business insurance at the best of times. We believe it should be a non-negotiable element of business life. But it's especially important during tough economic times. This is because most businesses tend to run with tighter margins for error when things are a little slow. A significant event in the life of a business, such as an injury to you or the loss of key personnel, is much less likely to be absorbable when cash reserves are lean. The reality is that economic conditions will always be cyclical. Sometimes it can just be about keeping your head above water until the tide recedes, and having adequate insurance could end up being the difference between survival and catastrophe.
 
We'd like to hear your thoughts on the economy and how it's affecting you and your business. If you've got anything you'd like to share, please email us with your thoughts, and we may republish some of them (anonymously of course) in future issues so that we can all get a feel for what others are experiencing.
 

Changes to Retention of Title laws

In October 2011 the new Personal Property Securities regime will commence. This is a national scheme that brings together a number of different state and territory laws covering security over property. A common example is where a lessor retains security over an asset until the lease has been paid out. Even though the program has the word 'personal' in it, it applies to all businesses that hold security over 'personal property', which for these purposes is almost anything other than land.

One area where many businesses are likely to be affected is when using Retention of Title (ROT) clauses. We addressed this in our December 2010 Newsletter. While there has been some delay to the implementation of the scheme, the effect is still the same. If you sell stock and have an ROT clause in order to protect your interests, that will no longer be enough. In order for you to preserve your interest in the inventory until payment is made, you will also need to register the security interest with the Personal Property Securities Register. Failure to do so may mean that your interest in those goods will be lost to another party who has registered a security interest.

There will be a two year transitional period to register ROT sales, up until October 2013. After that time, interests will need to be registered before goods are supplied (or within 15 days if they are plant and equipment), for every customer that you have an ROT arrangement with. You don't have to register every sale, as one registration will cover all transactions with that customer.

If you use Retention of Title clauses, it's critical that you undertake a review of your procedures and policies to make sure that all relevant future transactions are registered. You'll also need to make sure that you amend any affected documentation, such as your terms and conditions of sale. You should also review your current customer/client lists to see if there is anything that needs to be registered. Finally, you should seek legal advice to ensure that your procedures and documents are legally sufficient to protect you.

Please contact us for further information or assistance.
 

Cut down on your superannuation paperwork

If you feel overwhelmed at times by the volume of paperwork involved in running your business, there's a rare piece of good news that should help you cut the cost of paying employees' superannuation.

The Tax Office has recently launched a new initiative called the Small Business Superannuation Clearing House. This service is designed to reduce the red tape burden for small businesses in managing their superannuation obligations. Instead of having to send payments off to a variety of different funds, you can use this as a central place to pay them all in one transaction. You simply enter your employees' fund details and the amount of the contribution for each, and the Clearing House distributes the payments to the relevant funds.

The Small Business Superannuation Clearing House is a free service for businesses with less than 20 employees, and has the added benefit of functioning as a record of your payments to demonstrate that you have complied with your obligations under the Superannuation Guarantee. You need to register first to set up your account, and after that simply log in with a username and password.

For more information, visit the Small Business Superannuation Clearing House help page.

July 2011 Newsletter 

You can view this newsletter in its original format here.

What follows is the text of the newsletter only.

Use your superannuation to buy property

Would you prefer to have 'bricks and mortar' in your superannuation? Changes to superannuation law mean that there may be an alternative investment option available to you - one that could improve your returns and help you to acquire some real estate in the process.

Up until recently, there has been a long-standing limitation on how superannuation funds can use their assets to create wealth within the fund. It's something that in our profession has always been one of those 'givens'.

This principle was a simple one - superannuation funds cannot borrow money.

The logic behind the restriction was somewhat understandable. Superannuation savings are intended to be there when you retire. Superannuation ensures that you can maintain your standard of living when you finish working (if managed correctly) and, from the Government's perspective, reduces the burden of funding the retirement living of the population. So the prohibition on borrowing has been there to ensure that superannuation funds achieve these goals. It prevents funds from borrowing to invest in risky ventures that might fail and jeopardise the cash reserves of the fund. It also ensures that the fund is relatively liquid and able to pay out its member benefits when the time comes.

But there have always been a few very valid objections for specific situations where it would make sense for a fund to be able to borrow (and in fact there were already very limited, and quite convoluted, ways in which some funds were effectively doing it anyway, through share warrants). One of these objections is when purchasing real estate property. Property is a relatively safe form of investment - much more so than some recent market-based investments that have not been off limits to superannuation funds - and borrowings are secured over the property. What's more, property is a proven wealth generator that returns relatively consistent growth through capital gains over time. Superannuation funds have always been allowed to buy property (subject to some restrictions). They have simply not been permitted to borrow to do it, and so for many people, the balance of their superannuation has been insufficient to cover one hundred per cent of the purchase price, rendering property off limits as an investment option.

This has now changed. Superannuation funds are now permitted to borrow money in order to purchase property. This is naturally subject to some conditions.

1.The borrowings can only be secured over the property itself, not over any other assets of the fund;

2.Because of the limited recourse borrowing required above, banks will only lend around 60% of the value of the property. Therefore, the fund will need to have approximately 40% of the purchase price of the property (i.e. the fund can only borrow up to a maximum of around 60%);

3.If that amount cannot be provided up front, there must exist the capacity to contribute that amount in the year of purchase (subject to contributions limits) or the ability to roll the balance in from another fund; and

4.The property itself must satisfy all of the other normal superannuation fund investment restrictions. So, for example, the fund cannot buy from or lease to a member or an associate (unless it is a business property).

There is also another more practical restriction. You won't be able to take advantage of this opportunity if you have your superannuation in a market or industry superannuation fund. This is not so much a legal limitation as it is a logistical one. Large, commercial superannuation funds are not likely to micro manage individual mortgages and properties for each of their numerous members. The only real way to leverage this opportunity is to have your own Self Managed Superannuation Fund (SMSF). An SMSF is a fund that you operate and control yourself, making your own investment decisions and paying your own costs (through the fund).

This is an area that we have specialised in for many years. We can set your superannuation fund up for you, and then prepare all of the necessary annual returns and statements to satisfy the compliance obligations of the fund. Depending on the balance in the fund, SMSFs can sometimes cost a little more to operate. But they can also cost much less and regardless, the returns are potentially greater, you have more control over your investments, and now, you can effectively use your funds before retirement to purchase property in the SMSF. More often than not then, the additional financial benefits of operating your own SMSF significantly exceed the costs.

This change opens up a tremendous opportunity to utilise your superannuation nest egg now, in a manner that still remains relatively safe and secure. You cannot use it to buy your own residential house, but you can use your superannuation to, say, acquire a business premises or invest in a residential rental property.

Directors to be liable for employees' superannuation

One matter that came out of the recent Federal Budget is that the Government intends to introduce legislation that will make the directors of a company personally liable for employee superannuation that goes unpaid. The intention of this move is to counter so-called 'phoenix' activities, where a business will accumulate debts in a company to help improve cash flow, then liquidate the company to avoid paying those debts, only to resurface again later as a different legal entity.

Nothing has passed into law as yet, but at this stage it is intended that when it is passed, it will take effect from 1st July 2011. In summary, from 1st July 2011:

1.Directors will be personally liable for a company's failure to pay their statutory superannuation obligations (i.e. Superannuation Guarantee amounts);

2.The Australian Taxation Office (ATO) will be given powers to commence recovery against directors without the usual 21 day grace period; and

3.Directors and associates may in some circumstances be prevented from receiving any personal income tax refunds from the ATO while there are outstanding liabilities for employee amounts in the company.

It's worth noting here that this would also extend to contractors who, while treated as contractors for payroll purposes, may still be deemed employees for the Superannuation Guarantee. In these situations a company is still required to pay superannuation even though the person is being treated as a contractor, and as such if there is a default on paying the superannuation amounts, the directors would still be personally liable. These changes bring upaid statutory superannuation in line with unpaid PAYG withholding, for which directors are already currently personally liable.

The effect of these changes is yet another increase in the burden of responsibility that comes with being the director of a company. It is therefore extremely important that if you are a company director, you familiarise yourself with your obligations and make sure that your company is able to pay its debts as and when they fall due - particularly statutory amounts like superannuation and PAYG tax.
 

The carbon tax

Unless you've been living in a cave, you may have heard recently of a little thing called the Carbon Tax. As you would no doubt be aware, the theory behind it is very simple - if it costs more to pollute through putting a price on carbon, there is a disincentive to emit carbon and an incentive to find alternative, less carbon-producing sources of energy. The execution, of course, is far more complicated.

As a general rule, only very large corporations that produce significant levels of carbon will actually have to directly pay the tax. However the flow-on effects potentially will be significant. For this reason the Government has announced a number of tax reform measures to compensate households and small business.

1.A household assistance package will be introduced, targeting low- and middle-income earners. It is estimated that up to two in three households will be able to offset the total effect of the tax through assistance, and that nine in ten will receive some form of assistance.
 
2.Personal income tax cuts were announced that will come in two instalments, one on 1st July 2012 and the other on 1st July 2015. Through changes to the tax free threshold and marginal tax rates, the combined effect will be that for taxpayers earning up to $80,000 per annum, most will receive around $300 extra per year.
 
3.The small business instant asset write-off limit will increase from $5,000 to $6,500. This means generally that for businesses with turnover under $2 million, any assets purchased after 1st July, 2012 for $6,500 or less can be claimed in full as a deduction in the year of purchase.
 
4.People receiving Family Tax Benefit will receive an up-front lump sum payment in May-June 2012, and a fortnightly tax-exempt supplement from 1st July 2013, which will amount to the equivalent of a 1.7% increase in the annual rate of the benefit.
 
5.Pensions, allowances and benefits will also increase, and this will include certain other special measures for those with particular needs, such as an extra payment for those that have high energy needs due to the use of medical equipment.

Draft legislation was expected to be released by 31st July. We'll keep you posted as relevant issues come to light.