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Super Guarantee Rate is Set to Rise from July – Are You Prepared?

The superannuation guarantee statutory rate has remained at 9.5% since July 2014. However, plans have been in place for some years now to increase the rate to 12% incrementally.

In July 2021, the rate will rise to 10%. From then on the rate will increase by 0.5% each year until July 2025 when it will reach the legislated 12%.

Prior to the delayed 2020 federal budget there was discussion about the possibility of deferring the rate rise because of COVID-19. However, the rate rise had been postponed from 2018 to 2021, so the plans to start increasing the rate each year remain in place – at least for now.

Prepare Now for the July Rate Rise

  • Review your current superannuation costs for all employees, both hourly and salaried.
  • Review any salary packaging arrangements. Is the agreement inclusive of superannuation or is super paid on top of the agreed salary?
  • For salary packages inclusive of super, you will need to check the contract’s wording to make sure you apply the changes correctly. This change may also impact annualised salary arrangements.
  • Calculate your revised payroll costs from July, showing the current wages and superannuation expense compared to the new rate from July 2021. Highlight the increased amount per month or quarter, so you know precisely what the impact will be.
  • Discuss the super rate increase with your employees now. Let them know that this is the first year since 2014 that the rate has risen and that unless the law changes, there will be an increase of 0.5% each year from now until July 2025 when the statutory rate will reach 12%.
  • Remember – short payment or late payment of super can incur hefty penalties – plan now for higher payroll expenses from July, so you don’t get caught short.

If you’d like help reviewing payroll costs and employee agreements, talk to us now, and we’ll make sure you have accurate reports to make planning for the rate rise easy. Getting organised now means that you’ll be well prepared for your business’s increased costs when the first payment is due later this year.

Can Your Business Claim the Loss Carry Back Tax Offset?

As part of the Federal Budget 2020-21 the government announced a loss carry back measure to encourage new investment and work with the temporary asset expensing measures also announced at the budget.

The new law started on 1 January 2021.

Eligible corporate entities that previously had an income tax liability in a relevant year and have subsequent losses can claim a refundable tax offset up to the amount of their previous liability.

The measure allows significant tax losses which may then be carried back to generate cash refunds for eligible businesses.

Who is Eligible?

  • Your business must be a company, corporate limited partnership or a public trading trust in the income year you want to claim the offset.
  • The business must have had an aggregated turnover of less than $5 billion.
  • The entity had an income tax liability for financial years 2019, 2020 or 2021.
  • The entity subsequently made a loss in financial years 2020, 2021 or 2022.
  • Your business is up to date with tax return lodgement obligations for the last five years.

There are specific guidelines about eligibility, integrity and tax offset calculation. We can talk to you about whether you can use the loss carry back measure to benefit your business.

You can only claim the tax loss once in either the 2021 or 2022 financial year so it’s important to get advice about how and when to apply this measure for your business. To claim the tax offset the ATO must be notified before lodging the company tax return that year.

Buy or Lease Business Assets?

There are certain items of equipment, machinery and hardware that are essential to the operation of your business – whether it’s the delivery van you use to run your home-delivery food service, or the high-end digital printer you use to run your print business.

But when a critical business asset is required, should you buy this item outright or should you lease the item and pay for it in handy monthly instalments?

To buy or to lease?

Buying new pieces of business equipment, plant, machinery or vehicles can be an expensive investment. So, depending on your financial situation, it’s important to weigh up the pros and cons of buying or opting for a leasing option.

First of all, let’s look at why you might decide to buy the item…

Buying: the pros and cons:

  • Pro: It’s a tangible asset – when you buy an item, you own the item outright and it will appear on your balance sheet as one your business assets. As such, by owning these assets outright you increase the perceived capital and value of your business. You can also claim the cost of the asset against your capital allowance for tax purposes.
  • Pro: It’s yours for the life of the asset – once you own the item, you have full use of the equipment for the duration of the life of the asset. Your use of the asset isn’t reliant on you being able to keep up regular lease payments, and if your financial circumstances change then you can sell the asset to free up the capital.
  • Con: It’s an expensive outlay – paying for the item up-front is a large outlay for the business and will require you having the cash to cover this cost. Spending a large lump sum in this way may take cash away from other areas of the business, so you need to be 100% sure that this purchase is the right decision and a sound investment.
  • Con: You may require extra funding – if you don’t have the liquid cash available to buy the item outright, you may need to take out a loan. Asset finance is available from funding providers, but does tie you into a loan agreement that will add to your liabilities as a business – reducing your worth on the balance sheet.

Leasing: the pros and cons:

  • Pro: Leasing has a cheaper entry point – if the item you need to purchase has a large price tag, leasing allows you to make use of the asset without the cost of buying it in full. For startups and smaller businesses with minimal capital behind them, this can make leasing a very attractive option. You may not own the asset, but you can make use of it – and this may be the difference between the success or failure of your business.
  • Pro: You can spread the cost – there is still an associated cost of leasing, but you can spread the cost over a longer period, making it easier to find the necessary liquid cash to meet your lease payments. With this money saved, you can then invest in other areas of the business, helping you to expand, grow and bring in more customers and revenue.
  • Con: You don’t own the asset – there are different types of leasing agreement. Under a capital lease, you do own the asset (once you’ve paid if off). But if you opt for an operating lease, this is a more short-term lease and you won’t own the asset at the end of the contract. Ownership does have its advantages (including being able to sell off the asset if required) so it’s important to consider what kind of leasing agreement you’re entering into and what the advantages/disadvantages may be.
  • Con: You may pay more in the long run – most leasing agreements will attract additional costs and interest on your agreement, so you may well end up paying more than the market price for your asset in the long term. If you can cope with the higher cost, this is fine, but bear in mind that buying outright may have offered greater value.
  • Con: You may lose the use of the asset – if you can’t keep up your lease payments (due to poor cashflow for example) then the owner of the lease agreement may recall the asset. If this item is crucial to your business model, losing this key asset can have a profound impact on your ability to operate. In this respect, leasing is a more risky prospect, but also an easier option for businesses with less cash to splash.

Talk to us about whether buying or leasing is the best way forward

Whether you opt to buy or lease your equipment isn’t always a straightforward decision to make – so it’s a good idea to consult with your accountant early on in the decision-making process.

We’ll help you review your current financial position, assess your available cashflow and look at your regular cost base to decide whether buying or leasing is the right thing for the business.

Update Your ABN Details To Ensure Notifications In An Emergency

Emergency logo in white and red

Did you know that government agencies use Australian Business Number (ABN) details to identify individuals and businesses in communities affected by emergencies or natural disasters?

This can happen any time and any season, so we encourage you to keep your Australian Business Register (ABR) details up-to-date. This enables immediate emergency services assistance and ensures affected businesses are contacted in the event of crisis.

Details to Update

  • Check that your recorded names are correct – If you have legally changed your name, you should update that with the ATO so that the correct legal name is linked to your ABN.
  • Email address – This should be one that you can easily access from your phone or other means during an emergency.
  • ANZSIC code – It’s a good idea to check that this is correct for your business type in case your business services have changed since you registered your ABN.
  • Business address – This is essential to update, so that if an emergency or natural disaster affects your area you are contacted.
  • Telephone number
  • Postal address
  • Additional business locations – You can add multiple locations if your business operates from more than one premises.
  • Authorised contacts for the business – Consider adding more than one contact for the business.

Business, Individual and Company Names

Name changes can’t be updated on the Australian Business Register. If you need to update a business name, a legal individual name or a legal company name talk to us about liaising with the ATO or ASIC on your behalf to update your details.

Update Your ABN Details Now

Changes made to the ABR reflect immediately. It is always important to keep ABN details up to date, but for businesses in disaster prone areas, it is especially crucial as this can make all the difference with getting help quickly. Emergency services can access contact details from the ABR, which means affected businesses can get important updates and assistance from emergency services without delay.

Visit ABR to update your ABN Details or let us submit these details on your behalf.

Five Tips For Running Good Performance Reviews

The concept of boosting business performance

When times get tough it can be easy to let some of your people processes fall away as you concentrate on the basics of the business.

Take the performance review. They can be unpopular, sucking up a lot of time and making employees and managers stressed. So why not skip them? Well, because good performance reviews work. They’re an effective way to track people’s progress, provide feedback, gain insight, support development and align individual performance with company goals, which helps the business achieve results.

It’s imperative however that they are done well. So here are some tips for getting the most out of your performance reviews:

  • Target the right people – not everyone has to have full, formal reviews. Prioritise the positions that have a genuine opportunity to deliver over-and-above results.
  • Focus on the conversation – documentation provides a basic way to articulate expectations, track performance and measure results, but it shouldn’t replace honest, two-way communication with your people.
  • Keep it simple – structure the review around the objectives needed for success in the role, the skills needed to achieve the objectives and a development plan that aims to improve skills, reach goals and help with career development.
  • Get the review cycle right – align full-scope reviews to an annual cycle and schedule regular check-ins at meaningful times throughout the year.
  • Use software – good software will help lighten the admin load and make it easier to chart and really analyse employee performance.

Christmas Parties and Presents On A Budget

A Christmas hat displayed on a beautiful beach

It’s been a financial rollercoaster of a year for most businesses, but Christmas time invites us to pause and celebrate what’s gone right and thank the people we rode with. Here are eight ways to keep your costs down without sacrificing festive fun.

  1. Go alfresco – Enjoy a free venue that’s good for the body, mind and party games….outside! Ask everyone to bring a rug and head to the local park or beach for a picnic-style Christmas bash.
  2. Share the love – Is your business in a large office or shared space? Throw a party with your neighbours. Saves money, resources and creates a valuable networking opportunity.
  3. Plan a potluck – Putting on a huge spread or taking your team out for dinner can be costly. Why not ask everyone to bring a plate? (Nibbles, cookies or fresh bread).
  4. Go locally-made – Support our economy and buy locally-made gifts for staff and clients.
  5. Make it a day thing – Serving a holiday lunch, brunch or mid-afternoon party can be more affordable because guests fill up with satisfying but inexpensive fare like sandwiches, pancakes, muffins, finger foods, crackers and dip. Plus, it’s often easier to fit into people’s diaries during the busy festive season.
  6. Choose a local venue – Keep costs down for you and your staff by hosting your Christmas party close by. That way people don’t have to spend lots on taxis getting to and from the party.
  7. Give the best present ever – Get in everyone’s good books and give them the morning off after the Christmas party. A small gesture that’s worth its weight in gold.
  8. Take the pressure off – If last year was the bash of the decade, don’t worry – people understand it’s been a tough year. Parties thrown on a shoestring budget can be the most memorable because they strip away all the window dressing and put the focus on people and fun.

Christmas Parties and Presents – and Tax!

Christmas gathering

Christmas is a great time to acknowledge and reward your employees and other associates by celebrating and giving gifts. But don’t get caught out by entertainment rules! Claiming entertainment and gifts as business expenses is not always straight-forward, as there are implications for GST, income tax and fringe benefits tax (FBT).

Is it Entertainment?

Entertainment is generally not a deductible business expense. Entertainment rules can be tricky, but in general, the more lavish the meal or event, the more costly, the later in the day and if alcohol is involved then it will generally be called entertainment.

Fringe benefits tax may apply to entertainment benefits provided to employees, and if an event or gift is considered to be entertainment then you cannot claim a business deduction or GST.

A Christmas party for employees, spouses, suppliers and customers may or may not be classed as entertainment. Check with us to see if any of the party costs can be claimed.

Keep it Free From FBT

  • If you give gifts to your employees keep them under $300 each. Benefits provided which have a value of less than $300 are exempt from FBT.
  • Give gifts to employees that they otherwise would have claimed as a tax deduction. For example, you could pay for a professional development course or give new tools.
  • Give gift cards or vouchers up to the value of $300. (Vouchers are not considered to be entertainment).
  • Avoid giving ‘entertainment’ gifts over $300, such as membership to clubs, tickets to events or travel.
  • Pay a Christmas bonus. Process through payroll like any other wage payment and withhold tax. Remember that superannuation applies to bonus wages.

Enjoy the Party

Talk to us when planning your Christmas gifts and events to check how much may be claimed as business expenses. Once you know the costs of throwing a party and giving gifts and bonuses, you can put your feet up and enjoy your own party!

Top Eight Things To Outsource In Your Business

A man is pointing his finger on the word outsource

If you’re looking to scale your business, you’ll need to spend more time working on it than in it. Finding ways to leverage your time is critical, and outsourcing your least favourite tasks is a great way to do this.

Things you should consider outsourcing in your business:

  1. Digital marketing.
    From your content strategy to your social media accounts, if this is not a strength of yours, outsource it! There are many freelancers who have multiple clients at this level, who’ll likely be more knowledgeable regarding SEO and much more effective and efficient in general.
  2. Graphic design.
    Your brand is a key reflection of your product offering. If you don’t have the skill, software and time to do this well, you’ll potentially damage your brand.
  3. Scheduling and administrative tasks.
    A Virtual Assistant can help you manage anything from your appointments to flights, emails and beyond (virtually anything admin). At a lower level, consider adopting software that’ll automate or minimise processes, such as self-booking appointment apps where your clients can schedule a meeting with you, e.g. Calendly.
  4. Customer feedback.
    Many businesses miss this valuable opportunity to connect with customers and improve their experience. A Virtual Assistant can help, but there are also apps (such as Ask Nicely) that automate the process of asking for feedback; directing happy responses to leave you Google reviews and negative responses back to you to quickly resolve!
  5. Inventory management.
    Too much stock can cause cashflow issues and affect sales price (due to resulting discounting), but not enough equals lost sales. Outsourcing inventory management can help you minimise stock-carrying costs and allow you to focus on more important things.
  6. Payroll.
    This task is best left to the professionals. Outsourcing payroll will minimise the risk of inadvertently getting it wrong, while saving you time and, most likely, reducing the cost of this task. Utilising a payroll product is another great option.
  7. Bookkeeping.
    Do bookkeeping tasks often infiltrate your evenings or weekends? Does the stress of these tasks piling up occupy your mind? Outsourcing these tasks (and the stress) to someone else can be liberating and cost-effective.
  8. Virtual CFO.
    If you find budgeting and forecasting a struggle, a virtual CFO can wear this important hat for you. They’ll monitor the financial health of your business and provide a fresh perspective which will help you make better strategic decisions and improve your results.

Tempted to start outsourcing some of your tasks to free up your time? We can help by taking the last three roles off your hands! We work with a number of our clients in this way, allowing them to focus on what they do best.

While outsourcing takes a little bit of setting up, it’s worth the short-lived pain for massive gain. We don’t have to be jacks of all trades. In fact, this thinking often leads to begrudgingly doing many things poorly rather than doing a few things really well – and enjoying doing them.

Work to your strengths, outsource the rest! Need help? Get in touch.

Top Tips For Building A Strong Company Culture

A group of people are discussing about strategies to establish a new business

Like it or not, all companies have a culture.

While it might be easy to define culture in nice words, it can be much harder to grab hold of in daily business, especially when times get tough.

A strong company culture is a driving force, underpinning a successful, resilient team. It shouldn’t be ignored, especially during testing times.

But what are the best ways to develop and manage a good company culture? Here are some top tips:

  • Get the basics right – sorting out the basics is critical to establishing solid employment relationships and building credibility, which become the foundation of your company culture. All your people processes are important, from the beginning of employment until its end.
  • Be human – once the compliance work is complete, treat people fairly, listen and seek to understand. There’s little to be gained by approaching every situation like it’s a courtroom drama or your company is an army.
  • Have a clear strategy – when your business strategy is clear, it will shape your culture. You can hire people who support the strategy, team members will know what to expect and what is expected of them, and management can be genuine.
  • Manage problems swiftly – allowing behaviour that is at odds with the company’s values and culture is incredibly damaging, no matter how good a person is at their job. Deal with issues quickly and ethically and stay focussed on the wider team.
  • Be consistent and stay true – a good culture will help carry the company through tough and turbulent times. Stick to your principles, maintain standards, and resist looking for shortcuts when the pressure is on.

Remember, company culture is organic, built by a team, and influenced by many things, never just one department or individual. Business leaders can seek to influence culture, but they can’t own it.

Demystifying Your Balance Sheet

The concept of balance sheet written on a blackboard

Do you understand the story your Balance Sheet tells about your business? It’s important you understand the components of your Balance Sheet and the key ratios that measure the health of your business.

1. It measures the net worth of your business.
Your Balance Sheet is made up of all of your assets and liabilities; your net worth is your total assets less total liabilities.

  • Current assets are assets which are expected to be converted into cash within 12 months; current liabilities are expected to be paid within 12 months
  • Non-current assets aren’t expected to be converted into cash in the short-term; non-current liabilities are long-term liabilities which aren’t expected to be paid within 12 months
    Your net worth is the owners’ interest in the business. In other words, if your business was to be wound up this is how much you’d be left with as the owner of the business.

2. It tells you if your business is solvent.
Solvency is the acid test for survival. If your business is insolvent, without immediate action to remedy this, it’s unlikely to survive for long. There are two components to solvency:

  • Current ratio greater than 1 (current assets / current liabilities)
  • Positive net assets (total assets – total liabilities)
    If your business is insolvent, you’ll struggle to pay bills on time and you may be personally at risk. It’s imperative you seek help immediately if your business is insolvent.

3. It allows you track the strength of your business.
By comparing your Balance Sheet to previous periods, you can track whether your net worth is increasing or decreasing. The stronger your Balance Sheet, the easier it will be for your business to survive a downturn. For example, if your retained earnings are diminishing over time, it’s clear that you need to take action to strengthen your Balance Sheet to ensure you’ll receive value upon the wind up or sale of your business.

4. You can calculate key ratios.
Key ratios not only allow you to compare your results year on year or to industry benchmarks, they also highlight areas for improvement.

For example, calculating your debtor days may show that it takes on average 35 days for customers to pay you. If your payment terms are within 7 days of invoice, it’s clear that your debtor processes need to be strengthened.

Perhaps you calculate how long it takes inventory to sell and see it’s taking twice as long to sell this year than it did last year. Or, maybe a specific product is taking a lot longer to sell than others, which may indicate you should discontinue it. Key ratios calculated using your Balance Sheet can tell a us a multitude of things.

Every business owner should be able to read their Balance Sheet and understand what it’s telling them. If you need help demystifying your Balance Sheet and identifying key areas for improvement, get in touch now!

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