Why is planning so important?

Why is planning so important?  No doubt you had numerous ideas over the summer break on ways you can improve your business in 2022.  Don’t let that impetus and initiative slip away!  The medium by which to bring those thoughts together and generate results is to bring everything together in a business plan.

And new year planning could not be more important given how covid affects us all.

Planning requires thought, analysis and decisions to be made in context of other factors and considerations (and not in isolation).  Planning requires clear thinking, rather than knee-jerk reaction, and forces you to take a breath.  It is no coincidence that those businesses that plan tend to be more successful.  It is that focus that also ensures that key people work on the key tasks and aren’t consumed by dealing with what were really unimportant but neglected matters that have become urgent.

In preparing for battle I have always found that plans are useless but planning is indispensable.
Dwight D Eisenhower
(And he should know as he was in charge of D-Day)

Some think it requires you to lock yourself away for days on end.  It doesn’t.  It will however take time as will the on-going reviews of performance.  Planning gives you a roadmap and series of goals to measure yourself against.  It also gives not clarity but also focus to your employees.  Don’t lose those ideas you had!  Set aside time to properly formulate a plan and put it into writing.

We have all the tools and experience to guide you through this process.

We also have the systems to both measure your success and hold you accountable in reaching your goals.

And what better way to identify key areas of focus for 2022 by attending our upcoming webinar – 7 key things to implement in 2022.  You can register your place by clicking here.

A good plan is like a road map.
It shows the final destination and
usually the best way to get there.

H J Judd

SG super reminder

Friday 28th January is the end date for satisfying your Super Guarantee (SG) super obligations for the December 2021 quarter.

Please note that super clearing houses take up to 10 days to pass the money through to the super fund.  It therefore means that processing and payment to the clearing should be made no later than this Friday.

And please make sure you have been calculating super at 10% since it increased on 1st July 2021.

SG super should never be paid late as late payments attract substantial interest and penalties.  Furthermore, SG (and BAS) liabilities that remain unreported and unpaid after 3 months automatically become personal debts of directors.

We welcome any question you might have.

Worried about your cash flow?

Worried about your cash flow?  It’s the number 1 concern at this time of year.  And understandably so as cash flow is the oxygen that keeps any business running.

Cash flow concerns this year are a bit different.

Whilst some business have sold their socks off over the last 18 months, others have got by whilst others have struggled.  Now that many businesses have been able to fully trade again, a Christmas holiday slowdown hasn’t exactly come at the right time for many.

It also appears as the ATO, who haven’t been chasing unpaid debts, now seemingly appears to be actively be chasing unpaid tax debts.  And for those with tax debts unreported and unpaid for more than three months, there is particular concern as it has been said by liquidators that the ATO will use the Director Penalty Regime to assign and collect business tax debts from directors.

Not being able to pay wages and other expense sin January and February is what keeps small business owners awake at this time of year.  And the problem is publicly available accounting software reports on the past.  Some may now market cash flow forecasting but that is very short term and incomplete.

So what do you need to understand and control your cash flow?

  • We can provide you with a number of tips gained form any years working with and advising a vast array of industries.
  • We have a specialised cash flow tool that provides full 4 way forecasts.

So what should you do?

We invite you to a free 30 minute meeting in which we can again understanding of your situation and concerns and then explain ways in which we can help.  You have nothing to lose and may end up sleeping better and enjoy Christmas.

Should you change business structure?

Trust, company, partnership or sole trader?  Choosing the right structure to run your business is not an easy task.

You have to take into account such things as:-

  • Asset protection
  • Family succession
  • Tax
  • Admitting or removing unrelated business partners.

Each structure has their own advantages and disadvantages depending on your personal circumstances.

But even with the right choice made at day one, personal circumstance often change over time to the extent that the original entity that once served its purpose no longer does.  Or becomes a hindrance.

There are two main obstacles to changing structure:-

  • Cost – both monetary and time (as in notifying customers etc as well as getting insurance and telecommunication contracts re-set in your new entity)
  • Transaction costs – in particular Capital Gains Tax, but also there can also be considerations such as Stamp Duty

But there are forms of relief under the Tax Act which either defer, reduce or eliminate and capital gain.

Too many accountants are focused on processing the past, whether that be a Tax Return or a BAS.  At MRS, we are focused on our clients’ long term success and security.  We are currently re-structing two clients structure – one to allow the admission of business partners and the other to obtain greater protection, greater tax efficiency and eventual exit of the business founder at a much reduced capital gain.

Are you concerned that you are not in the best structure?  Or may this is not something your accountant has not discussed with you.  Either way, we welcome a free 45 minute exploratory discussion.

The 5 key things to implement in 2022

Hard to be believe this year is almost over!  It has been a tough year for many.  But that said, the economy has performed surprisingly well, we have high vaccination rates and statements from our leaders that we are not going back into lockdown.

It seems as though we can relax over the Christmas break with a degree of calm.

The Christmas break is a great time to take a breath and re-asses your work and personal life.

But having started work on the back of the 1983 recession and worked through the ealry’90’s recession, not to mention the GFC, the 1997 Asian crisis and other such events, the effects of covid will play out for a couple of years yet.  We are not out of the woods yet.

In light of the uncertain times that lie ahead, on Wednesday 12th January we will explore 5 key things to address and implement in 2022

  1. Re-evaluate how covid has changed your business and moreover how your business needs to adapt. In particular we will explore who is now your customer target base and how to find them.
  2. Amend your STP payroll reporting to not fall foul of Fair Work Australia obligations.
  3. Making a profit is the goal but the oxygen to a business is its cash flow. We will explore how to better manage and improve your cash flow.
  4. With a federal election looming, take up any advantage under existing tax laws.
  5. Being in business carries the risk of getting sued. We will examine key asset protection strategies to protect the wealth you have worked hard to generate and/or inherited.

You can reserve your place at this 45 minute webinar by clicking here

And as we are passionate about helping small business owners through these difficult times, we welcome your passing on this invitation to family, friend and business associates.

Important change to employer super obligations

An important new requirement took effect from 1st November 2021.  Employers now need to complete an extra step in respect of super when taking on a new employee.

Back in 2005, the ATO introduced Choice of Super Fund rules.  This was a positive change as it ensured employees had a choice as to where their super would be contributed to.  This initiative limited employees having multiple accounts and therefore reduced extra costs and the opportunity for super to be lost.  And arguably more importantly, it also ensured employees did not lose life insurance under super when changing jobs.

Where an employee did not exercise their choice then the super had to be made to a default fund.  A default fund had to offer a minimum $50,000 in life insurance (hardly enough but better than nothing).  The default fund was also specified in an award (hence the rise of the industry funds).

An improvement has been made to the choice system in light of technological advancements and the number of employees with multiple super accounts as a result of their not exercising choice.

So from 1st November, a system has been put in place to staple a super account to an employee.  This means that the default fund choice will be replaced by employers having to contribute to a stapled super fund where no choice is exercised.  It only applies to employees employed on or after 1st November 2021 (with one exception below).

How do you find an employees’ stapled super fund?

If a new employee has not exercised choice within 28 days of starting employment, then the employer must log on ATO online services and access the stapled super fund service.  Apparently the stapled fund(s) will be listed on screen within minutes of completing a request.

We are not yet clear as to what employers without access to a computer or ATO online services are supposed to do (other than ask employees to complete and return the choice form within 28 days).

What if you contribute to a non-stapled super fund?

If an employer contributes into the default fund without checking for a stapled super fund, then that contribution will be subject to super guarantee charge.  In other words, the contribution is disregarded AND another contribution has to be made (which is non-deductible and can easily be two to three times more costly).

Other words of warning

  • Employers only have two months to contribute into a super fund after an employee has exercised their choice.
  • If you received an employees choice before 1st November where they nominated the default fund but no contributions were made before 1st November, contributions must be made under the new stapled super fund requirements.

Want to know more?

Call us

A stinging case for reviewing your asset protection planning

An over-riding goal of asset protection planning is to split personal wealth assets from business risks.  A common strategy has therefore been to have the non-working non-risk spouse hold the family home in their name.

This strategy has worked well.

Until that is the recently decided case of the Commissioner of Taxation v Bosanac.

In this case, the Australian Taxation Office was successful in recovering tax debts of Mr Bosanac against the family home despite the fact that Mr Bosanac’s name was not listed on title.  And it never was from the time the house was bought 15 years ago in 2006.

The key facts were:-

  • The house deposit was paid from a joint bank account.
  • The house was subsequently used as security for other loans.
  • The couple lived in the house for 9 years until they separated. Thereafter the wife continued to live in the house.
  • The husband subsequently used the house as security to fund share trading.

The Federal Court decided that on the basis of what they saw as objective facts, the property had always been held by both husband and wife.  Moreover, it seems unlikely that the case will be appealed to the next and highest court, the High Court, as the presiding Federal Court relied on precedents from the High Court.

It is of great concern that a prime asset protection strategy may no longer be effective.  Asset protection (including estate planning) is never a set and forget matter.  And with so much economic harm inflicted by covid on small business around Australia solvency risks have increased, arguably greatly so for some.

Now is a great time to review your asset protection strategies.  We welcome the opportunity to assist you and ensure that your family’s wealth is not left open to creditors.

State government assistance to the construction industry

Compensation is available to firms within the construction industry that were closed for the two weeks ended 4th October 2021.  Payments are tiered according to payroll size.

The compensation program is called Business Costs Assistance Program Round Four – Construction.

So how does my business qualify:-

  • Must have held an ABN as of 24th September 2021.
  • Must have been registered for GST as of 24th September 2021.
  • Have a payroll of less than $10,000,000.
  • If your business employs, you must be registered with WorkCover.
  • If your business doesn’t employ anyone, you must hold a WorkSafe Construction Induction Trading Card.
  • You must operate within an eligible sector – click here to check your business.
  • Your business must have incurred costs directly due to the lockdown and were not able to operate remotely.
  • Your business must have been contracted to work within a lockdown municipality.

Costs directly incurred as a result of the lockdown include such outgoings:-

  • Contract penalties
  • Equipment rental
  • Paid employee leave for staff who were prohibited from attending a work site.

Business that received any one of last year’s three rounds of the Business Support Fund and/or the Pay-roll Tax rebate/waiver can apply.

However, businesses do not qualify for round 4 if the received any one of:-

  • Business Costs Assistance Program Round Two
  • Business Costs Assistance Program Round Two – July Extension
  • Small Business COVID Hardship Fund

Those businesses still awaiting the outcome of their application to those three programs can apply for Round 4.  If successful under any of the four programs, they will be paid under the grant that pays the greatest amount.

The grant amount is tiered to payroll size:-

  • $2,000 for non-employing businesses.
  • $2,800 for employers with an annual payroll of less than $650,000.
  • $5,600 for employers with an annual payroll between $650,000 and $3,000,000.
  • $5,600 for employers with an annual payroll between $3,000,000 and $10,000,000.

Applications are to be processed within 10 business days with the program closing on 9th November or earlier of the allocated funds run out.

We welcome the opportunity to examine whether you qualify, answer any questions you may have or assist you with your application.

Does your businesses now qualify for rent relief?

Many Victoria businesses suffered through lockdown.  But whilst it may have been tough from early August, many businesses did not see their turnover fall by more than 30% in a 3 month block to the end of September.

This was unfortunate as it meant rental relief could not be back-dated to 28th July.

But what seems to have been forgotten is that, with the three months ending 31st October being almost all in lockdown, there may have now been a greater than 30% fall in turnover.  Such businesses would now qualify for rental relief until mid January 2022.

So is your business one that now qualifies?

 

 

Director Identification Numbers

Over the next 13 months, every director needs to apply for what is called a Director Identification Number (aka Director ID & DIN).

The purpose is so ASIC can identify every director in Australia.  This is primarily being done to prevent what is called phoenixing.  Phoenixing is where one insolvent company is abandoned only for that business to suddenly be run by another company; that new company might have the same directors or relatives thereof.  If your business has been dudded by such activity then you will be all in favour of this.

DIN’s are also being introduced to prevent fake identities being used.

To facilitate this, the ATO will be entrusted with the system.  And what was known as the ABN registry will become the Australian Business Registry Services.

There will be a transition period with the expectation that by November 2022, all Australian directors will have been issued with their director ID.

  • From November, any new director will need to apply for DIN and do so within 28 days.
  • Current directors need to have applied for their DIN by November 2022.
  • By November 2022, a first time director will need to apply for a DIN before becoming a director.

So you will be issued with a unique number.  You will be issued with just one number irrespective of how many companies you are a director of and it will stay with you until the grave (and never be re-assigned to anyone else).

How do you apply

Somewhat oddly, directors must apply for their own DIN; accountants and lawyers cannot do so for their clients.  This seems a remarkably impractical requirement given the age and computer abilities of many directors.  Furthermore, many of our clients don’t have (nor want) a MyGov account but will be forced to open one.  Some clients don’t even have a computer (which is not  crime).  Moreover, many will feel uncomfortable providing proof of identity documents such as passports, birth certificate and drivers licence.  Only those with a disability, injury or illiteracy can ask someone to ask on their behalf.

The fines for non-compliance are breath taking – 5,000 penalty units ($1,050,000 – yes more than $1mAUD) or three times any benefit derived.

This process will also clean up ASIC’s data base which is full of permutations of a director’s name and/or address.  It is not uncommon to on board a new client and find there are 3 versions of their name across multiple entities due to a missing middle name or mis-spelt names.  Fortunately, this is a process we have already been tidying up as part of our new corporate affairs program you have seen by virtue of the new ASIC Annual Reviews.

Whilst we are denied from being able to apply on your behalf (as we can do for Tax file Numbers, and ABN applications) we will happily answer any question you may have so we can point you in the right direction.