20 February 2018

The Growth Strategies in Tough Times

By Steve Marsten

It never ceases to amaze us how some businesses continue to operate without any formal business plan. Is it possible for a business to operate without one? Of course it is. And that’s the conversation we continue to have with small business owners. Do they really know how much better their business could be or how much more their business can deliver in terms of services, value to customers and their employees as well as to themselves without a business plan?

Most businesses still operate with a limited thinking about what their business is capable of and they are not addressing critical issues within their business planning process.

We use business strategies to develop our business plan. It’s a basic 3-4 page document that highlights what needs to happen to drive the business more then just CPI or 5% or 10%.

Your strategy should make you think about 5 key elements at least:

1. Efficiency 
2. Systems 
3. Innovation 
4. Strategy for Growth and Marketing 
5. Risk Management

Efficiency is about doing more with less and SME owners tend to find more ways to operate more efficiently with lower costs. Communicate and discuss with your staff. They are the largest untapped source of knowledge in improving your business.

Depending upon the size of your business, there are different accounting systems that you can use that save you time and hence money! Find out about improvements for small business accounting systems with help from an experienced accountant.

Innovation has to be one of the most important issues of your business planning. It means NOT thinking about what you do now but thinking about how others who maybe moving into your industry, would be establishing themselves differently to you. “Radical” and “New to the world” are the buzzwords however innovation is often about taking something old and tweaking it some more.

Growth Strategies are a key to keeping the top lining improving every year even in a contracting economy. It’s about examining your market; your products and your adaptability to changing markets.

And finally SME’s take on more risk then anyone in the business world. Risk mitigation is the key by having Plan B’s for any major risk issues identified in your business.

I have touched on some key points with business planning. They are all critical to a successful business. Call us at Sothertons to assist you in building a practical Business Plan for the tough times on 4972 1300.

13 February 2018

Crypto Currency – The Taxman is Watching

By Joe Smith

The debate over crypto currencies, specifically bitcoin,  has been everywhere over the past few months however one thing that is very important that hasn’t been in the headlines so much is how they are treated for tax purposes in Australia.  The ATO are keeping a close eye on crypto currencies and are consulting with experts on how it should be taxed in the future. 

The current view of the ATO is that bitcoin is nether money or a foreign currency but is similar to a barter arrangement.  From 1 July 2017 the sale and purchase of bitcoin is not subject to GST.  If you are simply using bitcoin to purchase personal goods or services and you are not in business then there are no income tax consequences.  Further to this use, any capital or gain or loss will be treated as a personal asset if the cost of the bitcoin is $10,000 or less.

Where someone is mining bitcoin, this is treated as carrying on a business and as such any income from the transfer of bitcoin to a third party is assessable income.  Any expenses incurred in mining bitcoin are allowed as a tax deduction however non commercial loss provisions may apply.  And if bitcoin stock is held in this scenario it is treated as trading stock.

Finally, the most probable scenario is bitcoin acquired as an investment.  If you are not carrying on a business, any gains or losses will be subject to capital gains tax law with tax payable on any gains made and losses being available to offset against future capital gains.  However, regularly buying and selling bitcoin will most likely be treated as a business by the ATO subject to specific tests and criteria.

And remember the ATO are very resourceful and can look at your lifestyle and living expenses if you get audited and have not declared any capital gains or income.  If you queries on tax and crypto currencies, talk to the tax experts at Sothertons Gladstone on 4972 1300.

06 February 2018

Who uses cash these days?

By Tina Zawila

You would think in this modern day of “plastic” money, that the ATO would be less concerned about the cash economy, after all, who uses actual cash these days?!?  Think again, cash economy audits are alive and well with the ATO.

As a business owner, how do you ensure you can survive an ATO cash economy audit unscathed?

It all comes down to record-keeping and supporting evidence.

When the ATO comes knocking they will request things like Cash Register Tapes (Z Reads) and any other Point-of-Sale reports.  Yes, they will ask for your till tapes, so I hope you are closing off the till every night and retaining the register tapes.  They will also ask you about your “close-of-day” procedures used to reconcile daily sales records to bank statements. How you answer these questions and what supporting documentation you have available will determine how the audit is likely to pan out. 

They will also ask you for your personal records including your personal bank statements and will ask you to complete a living expenses worksheet.  The ATO is matching your lifestyle to the income you are declaring in your business.  Remember they have access to information that you may not have thought of, like Main Roads information on that new car, boat or jetski that you purchased during the year.

The ATO also has access to benchmarks which they will use to compare your business to the rest of your industry.  If your sales are low, or your stock purchases or other expenses are high or outside the “norm”, you can expect questions to be asked.  In fact, if there is a lack of evidence, they are likely to rely on these benchmarks to make an adjustment to your income and assess the tax accordingly. And it’s not just income tax, it’s also GST and the interest and penalties for failure to keep records and making false or misleading statements on both your tax return and your activity statements that will hit you hard.

Your best defence to a future ATO Cash Economy audit is to ensure you are well prepared now.

If you need help with your record-keeping or want to know more about the ATO’s industry benchmarks applicable to your business, call the professional team at Sothertons on 4972 1300.  

30 January 2018

USA cuts tax rates to Companies by 40%!!

By Steve Marsten

On 20 December 2017, the United States (US) Congress passed US tax reforms including a reduction in the federal corporate tax rate from 35 to 21 per cent. That’s a whopping 40% reduction. Just for a moment – let’s not listen to all the naysayers (big spending politicians I mean) who only want to live in a world of high taxes. Let’s look at what this means for Australia. There is a global trend toward lower corporate taxes. In theory, a corporate tax rate cut stimulates investment by making more investment opportunities sufficiently profitable to attract financing.

The extent to which this is the case in practice will depend on how the tax cut is funded and whether investors consider the tax cut to be permanent. If the corporate tax rate cut results in an overall reduction in tax on US investments and investors believe that the tax cut is permanent, we are likely to see an increase in the level of US investment.

When you consider that the UK corporate rate is 19% for small corporates; France is reducing their corporate tax rates and Germany sits at 15%. Australia is a fair way behind the eight ball.

The magnitude of the resulting capital loss in those countries with higher tax rates like Australia will depend on the size of the US corporate tax cut – but I can tell you this is a BIG cut.

For Australia, the size of the negative impact will also depend on how other countries respond. As capital markets have become increasingly global and business locations increasingly mobile, governments have sought to drive economic growth in their jurisdictions by lowering corporate tax rates. The US reforms have the potential to accelerate tax competition between jurisdictions, making Australia’s current corporate tax rate increasingly uncompetitive internationally.

Here we only just got the 27.5% rate in for Corporates. Just ask yourself would you like to pay 21% or 27.5% and 30% in some cases here in Australia? Messrs Turnbull and Shorten do you not see the likely impact? Capital WILL leave Australia as a result of the US’s huge decision to free up domestic capital. Increased investment means increased workforces and more people employed. Both shades of politics should be happy. Let’s make 2018 the year of economic sensibility!

Call us on 4972 1300 for all your business needs.

23 January 2018

New Year, New Entrepreneur?

By Joe Smith

At this time of year, is it likely that most people will be starting the year with a fresh slate.  Some will have personal goals or maybe even be looking to go into business for themselves.  A recent study has found there are some decisive factors in becoming an entrepreneur and also points to the requirement of having three character traits – being independent, trustworthy and hard working.  If this sounds like you then please read on!

One interesting finding of the study was that less than 25% of entrepreneurs researched mentioned money as a motivating factor.  The desire to be their own boss was the main factor that was reported, with freedom and being in control of your work closely following.

There are a few things to keep in mind if you are thinking of starting your own business or buying an existing business with the aim of becoming the next Richard Branson.  Firstly, it is important to carry out due diligence on the new venture.  This can include research on whether there is a market for the idea that you have for a business, are there any legal requirements for operating the business, preparing estimates of income & expenses and cash flow requirements Finally, if you decide to go ahead a business plan will also be required.

If it is an existing business you are looking to buy, a detailed investigation of all aspects of the business will be required.  For this, it would be advisable to speak to a professional who has experience of carrying out this due diligence work as will include an analysis of the historical financial statements and records to determine whether the purchase of the business is viable and that the data provided by the seller can be relied upon.

One thing it is important to look out for in the financial review is the add backs of expenses that were deemed to be personal to the owner as this is a major factor in calculating the value of the business.

If you are thinking of starting or buying a business, talk to the experts at Sothertons Gladstone on 4972 1300 or email Joe at j.smith@sothertonsgld.com.au

16 January 2018

Fast Track your First Home

By Tina Zawila

It’s the time of the year when many of us review our goals and for some buying their first home is on the list.  This particular goal will require patience, persistence and determination, to save for the deposit, find the right property, and navigate the home loan market to find the best deal for you.

In the May 2017 Federal Budget the Government announced the First Home Super Saver Scheme which came into effect from 1 July 2017.  This scheme allows taxpayers to make voluntary contributions to superannuation to save for your first home, and then apply to have the funds released (with earnings) from the fund when you are ready to buy (provided it is after 1 July 2018).

The benefits of this scheme, over the traditional means of saving for a deposit via a bank account, include:

  • ·    The contributions can be made before tax (concessional contributions) via a salary sacrifice arrangement, or by claiming a tax deduction for the contributions in your tax return.  This has the potential to save tax (depending on your marginal tax rate), allowing you to put a little extra away.

  •     Upon withdrawal, you will be entitled to the earnings on the contributions which will be calculated based on the 90 day Bank Bill rate plus 3 % (which is the ATO’s Shortfall Interest Charge and it is currently 4.72% for the March 2018 quarter).  This rate is likely to be higher than the interest rate on a traditional savings account from a financial institution.

Of course, there are terms and conditions associated with this scheme including that your first home saver contributions must be made within existing superannuation caps ($25,000 in 2017-18).  Which means you need to know how much is currently contributed to super for you by your employer including any existing additional contributions.

You will also pay tax upon withdrawal of the funds at your marginal rate, however, a 30% offset will be applied, which may mean that little, if any, tax is payable depending on your income level in the year of withdrawal.

This is general information; please contact the professional team at Sothertons Gladstone on 49721300 for advice tailored to your own personal circumstances.  We are here to help you achieve your goal of home ownership. 

09 January 2018

The Bitcoin Phenomena

By Steve Marsten

Clients have been asking us about Bitcoin for several months now. I thought it was time to cover the basics. Bitcoin was invented as a peer-to-peer system for online payments that does not require a trusted central authority such as a bank. But it does require that you TRUST the system. Since its inception in 2008, Bitcoin has grown into a technology, a currency, an investment vehicle, and a community of users.
Since anything digital can be copied over and over again, the hard part about implementing a digital payment system is making sure that nobody spends the same money more than once. Traditionally, this is done by having a trusted central authority (like PayPal) that verifies all of the transactions. The core innovation that makes Bitcoin special is that it uses consensus in a massive peer-to-peer network to verify transactions. This results in a system where payments are non-reversible, accounts cannot be frozen, and transaction fees are much lower. Its like an honesty system but everyone is keeping an eye on each other.
You will hear and read about Bitcoin Mining or Miners. They are not the miners as we know the term. These are computer nerds who are the backbone of the Bitcoin network.  They oversee the network and process every Bitcoin transaction. Without them the network would collapse and lose all value. Nobody seems to know who these people are other than the few souls who have shown their faces on documentaries over the past 12 months. These users are rewarded with new bitcoins proportional to the amount of computing power they contribute to the network.
As we mentioned above, there is no central person or central authority in charge of Bitcoin. Various programmers donate their time developing the open source Bitcoin software and can make changes subject to the approval of lead developer Gavin Andresen. It is in the miners’ best interest to only accept changes that are good for the Bitcoin currency in the long run. These checks and balances supposedly make it difficult for anyone to manipulate Bitcoin.
The best way to learn about Bitcoin is to spend time researching it. It is not an investment that we would recommend due to its highly volatile state.

For further information though, call our team on 4972 1300. Happy New Year from the Sothertons Team!